Recovering money from people can certainly be challenging. It is therefore not surprising that trustees and managing agents alike prefer to add contributions and charges payable by members directly to what we in practice commonly refer to as their “levy account” or “levy statement”. One of the obvious reasons for this is that it gives the body corporate leverage in that, when the owner eventually wants to sell or for some other reason transfer their property to someone else, the body corporate will be able to withhold the levy clearance certificate until such time as this “levy account” is settled in full.
The potential for abuse of this practice is one of the reasons why the legislature has included the proviso in the Prescribed Management Rules (PMR) that the body corporate may only debit a member’s account with amounts that are either a:
levied in terms of either:
a. “the Act”
(referring to the Sectional Titles Schemes Management Act, 8 of 2022)
b. “these rules”
(which refers to the Prescribed Management Rules and arguably extends to the body corporate’s amended Management Rules approved by the CSOS).
So, before one can add an amount to the owner’s account, that amount has to tick the relevant boxes: either 1 or 2 above as well as a or b.
Now, if an owner’s geyser burst and the insurer subsequently approved the claim, the temptation is to simply debit the relevant owner’s account with the excess payable to the insurer, but let’s take closer look at this together.
We know that PMR 23(2)(b) makes the member responsible for the payment of the excess and immediately we tick box b above as the Prescribed Rules clearly provide for the payment of this amount by the owner, but it is as we pause at the word “amount”, rather than “contribution” or “charge” that we have to do some further investigation. Can we fit an excess amount payable into the box of either a “contribution” or a “charge”?
As neither term is defined in the Act or the PMRs, we have to turn to our dictionaries as well as the use of these terms throughout the rest of the Act and rules and find that these terms are meant to include those contributions raised to fund the expenses listed in the body corporate’s approved administrative and reserve fund budgets (commonly referred to as a “levy” in practice) as well as fees and interest. In my opinion, the excess amount payable to the insurer does not fall into either of these categories.
We find further support for the viewpoint that this amount does not constitute a charge or levy that may be added to an owner’s account when we turn back to read PMR 23(2)(b) in its entirety. We then see that this rule does not only confirm the owner’s liability in respect of the excess payable, but actually indirectly directs the body corporate on how to handle the process of recovering such amount in stating that the relevant member must provide the body corporate with written proof of payment of this excess amount within 7 days of receiving a written request to do so.
So while looking exclusively at PMR 25(5) may feel like staring into muddy waters, considering it side by side with PMR 23(2)(b) provides clarity. While our first instinct may have been that the excess is a charge payable in terms of a Management Rule and therefore allowable to add to the member’s account, PMR 23(2)(b) shows us that that would not be the proper way to deal with the recovery of such excess payable and that the body corporate is to send the member a letter of demand for payment within 7 days instead.
If you require assistance with the drafting of such a letter of demand, don’t hesitate to reach out to us at email@example.com and we will be in touch with a no obligation quotation for your consideration.
Article reference: Paddocks Press: Volume 17, Issue 2.
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