Paying Strata Levies at Sale is a Bit Different in South Africa

The Body Corporate Marsh Rose v Steinmuller and Others (A5002/2020) [2021] ZAGPJHC 440

Quick Read

This 2021 decision by the South African High Court is about a dispute in a strata title building between a strata buyer and the strata building over the payment of outstanding strata levies and other amounts before settlement. After buying the strata lot at auction, the strata building demanded payment of strata levies, judgment amounts and unassessed legal costs it had incurred against the former owner before issuing a levy clearance certificate [that’s required to finalise sales]. The buyer and strata building could agree about the amounts and ended up in front of the High Court. The key issues were whether a security payment made under protests was acceptable, what amount of security was reasonable and whether the buyer had to pay judgment amounts and legal costs. After considering the Sectional Titles Act 95 of 1986 [the South African strata law] the High Court decided that the strata building had to establish what was properly due, not all the amounts claimed were payable by the buyer, and that the security offered was acceptable. So, the South African High Court has limited a strata building’s power to force strata buyers to pay for all amounts they incurred [or recovered under judgments] against former strata owners for recovering outstanding strata levies. Although not directly relevant in Australia, the decision provides some useful lessons, including that when strata levy recover expenses [especially legal costs and judgment amounts] grow and become a significant proportion of the total due for strata lots, there’s going to be disputes about those expenses, costs and judgments between strata buildings, strata owners, financiers and strata buyers.

Implications

What is due to a South African strata building is not whatever the strata building thinks and does not include unlawfully raised strata levies or other amounts that aren’t legally due.

If a buyer makes an under protest payment that is less than claimed as security, the strata building must issue a levy clearance certificate if the payment is satisfactory.
What is satisfactory depends on a range of criteria that are commercially based and to be reasonably and honestly applied.
The reasonableness of a security payment is reviewable by Courts.

For the all the implications of this strata case [and all the other Strata Case Watch] become a paid subscriber to GoStrata Stak

Full Report & Case Details

This decision by the South African High Court is about a dispute in a strata title building between a strata buyer and the strata building over the payment of outstanding strata levies before settlement.

A strata lot was sold at auction in January 2018 when strata levies were overdue and the strata building had taken recovery action, including getting judgment.

The strata building said that the buyer had to pay all the amounts owed by the previous strata owner which included the unpaid strata levies, a judgment debt amount, and unassesed legal costs of the strata building totalling R312,903.21 before it had to issue a levy clearance certificate.

In South Africa, a strata lot sale cannot be finalised without a strata building levy clearance certificate.

The buyer offered to pay R150,000.00 saying that the strata building had not established it was entitled to the claimed amount and that was his assessment of the correct liability. The strata building rejected the offer but reduced its claim to R295,044.81 and provided a breakdown of the amounts claimed that included R43,380.09 for the legal costs of the judgment it had obtained and other recovery work against the previous strata owner.

The buyer then offered to pay R250,000 to the strata building as security to allow the sale to be finalised and after which the correct amount due could be determined.

Section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 allows for security to be paid to strata abuilding as an alternative to payment as a commercial option but has some qualifications.

The strata building refused the security offered.

So, the buyer applied to the Supreme Court for an order requiring the strata building to issue a levy clearance certificate for a R250,000.00 security payment.

Initially, a single Supreme Court judge agreed with the strata owner and ordered the issue of the levy clearance certificate on the basis of the R250,000.00 security payment. The strata building appealed to the High Court.

A few key issues were considered and decided by the High Court …

For the full report on & details of this strata case [and all the other Strata Case Watch] become a paid subscriber to GoStrata Stak

Keywords

#NSW #NCAT #commonproperty #repairs #upgrades #2023