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Sectional title owners have been deprived of one of the major benefits that were expected to ensue from the latest changes to the Sectional Titles Act.
Last-minute changes to the Bill amending the Act mean that individual owners are still at risk of having their homes attached and sold in execution of a judgment against the body corporate – even if they are up to date with their levy payments.
Russel Warner, a director of Courtwell Consulting and an expert on sectional title, says there was great excitement at the originally proposed amendment to section 47 of the Act, which would have taken away the possibility for sectional title owners of being held liable for the unpaid debts of their neighbours.
"As the Act stood before amendment, when a body corporate was unable to pay its debts and a creditor such as a local authority took judgment against the body corporate, all of the members were jointly liable for the debt even if they had paid their share of it
"The first draft of the amendment Bill aimed to change this situation, by providing in section 47 that as long as they had paid all amounts 'due' to the body corporate by themselves, they could not be joined in court proceedings and held liable.
"The only problem with this was the wording. 'Due' should have read 'due and payable' since the levy for the full financial year is actually 'due' when a resolution to this effect is passed by the trustees subsequent to the annual general meeting but is usually only 'payable' in monthly instalments."
Thus a simple addition of two words would have sufficed to give the individual owner whose monthly levy payments were up to date protection under the amendment.
"Instead, section 47 has been changed to such an extent that it now requires the owner looking for protection against liability to have paid the contribution required by the body corporate in respect of a particular debt.
"But owners pay their levies as single amounts and it would be an administrative nightmare to try to split them up into payments towards each individual creditor of the body corporate each month. And how are trustees or managers supposed to distinguish between monies paid towards a particular creditor when an owner is in arrears? What happens when an owner is in arrears and the body corporate argued that any payment must first be allocated to arrears?"
It is unclear, he says, why such a simple and equitable provision was complicated in this manner, but what is clear is that The Sectional Titles Amendment Act of 2005, which has already been passed by the National Assembly, has had one of its most important potential benefits to owners erased.
What is also clear is that the situation will not be resolved when local authorities start to issue separate accounts to individual sectional title owners as provided for in the new Municipal Property Rates Act.
Says Warner: "Once the owners of sections become individually charged for rates – as is already happening in some centres – rates are no longer a debt of the body corporate and section 47 should no longer apply, unless the body corporate has an outstanding rates debt.
"And it should have been the case that if there is an outstanding debt, only those members who are in arrears with their levies at the time of the changeover to individual accounts are liable to pay it.
"However, the last-minute changes to the amendment Bill mean that once again, innocent owners will be on the line for their delinquent neighbours, unless they want to risk losing their homes."
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