Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Homeowners’ Associations – Levy collection from demand to execution

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By Zerlinda van der Merwe

When a member of a homeowners’ association (“HOA”) is in arrears with their levy contributions, the trustees (of a Common Law association) or directors (of a non-profit company) may institute legal proceedings to ensure the recovery of these outstanding amounts.

The trustees or directors, or the managing agent will provide a levy collection attorney with an instruction to proceed with legal action against a member. This instruction will be accompanied by a breakdown of the relevant levy account, reflecting the arrear levies and other charges (such as building penalties, interest, water, sewerage etc.), and the domicilium address of the member (also known as the debtor) for service. The HOA attorney will then send the debtor a Letter of Demand via registered mail and a copy via email.

Should the debtor not pay the outstanding amount in terms of the Letter of Demand within seven (7) days of the date of the Letter of Demand, the HOA attorney will proceed to issue Summons in the relevant Court with jurisdiction. Once the Summons has been issued, it is sent to the Sheriff of the Court with jurisdiction, for service on the debtor at the domicilium address. The debtor (or the Defendant at this stage) will now have an opportunity to defend the HOA’s action.

If the Defendant does not serve and file a Notice of Intention to Defend, the HOA attorney proceeds with Default Judgment. However, if the Defendant proceeds to defend the action, the HOA’s attorney will proceed to apply for Summary Judgment. The Application for Summary Judgment must be supported by an Affidavit deposed to (giving evidence under oath) by a person, authorised by a trustee or board resolution, with personal knowledge of the matter (such as a trustee or director of the HOA or the portfolio manager of the managing agent.)

If either Default Judgment or Summary Judgment is granted, the HOA attorney will proceed to issue a Warrant of Execution against the movable property of the Defendant (now called the Respondent). The Sheriff serves the Warrant and attaches the movables of the Respondent. If sufficient movables are attached to satisfy the judgment debt, a sale in execution of the movables is arranged by the Sheriff. However, if there are insufficient movables attached, the HOA attorney will proceed with an Application which will result in the Respondent’s immovable property being declared executable. Before granting such an Order, the Court will consider whether granting the Order will be an unreasonable and unjustifiable infringement of the Respondent’s Constitutional right to housing (in terms of section 26 of the Constitution of the RSA). The Court will consider factors such as whether or not the immovable property is the Respondent’s primary or secondary residence; whether the immovable property is residential or commercial; whether the Respondent has a tenant residing in the immovable property; whether the Respondent is employed or unemployed; whether minor children are residing in the immovable property etc. There are certain provisions of the Constitution or Memorandum of Incorporation (“MOI”) of the HOA which are referred to in arguing for an Order in terms of this Application. These include, but are not limited to, the fact that an owner of an erf is a member of the HOA and is bound to the provisions of the Constitution or MOI and is liable to pay levies and other charges raised; the manner in which the levies were authorised; how the levies are raised; that the owners were notified of levy amounts/increases; that legal proceedings may be instituted and that legal fees may be recovered; domicilium clause; that trustees or directors may raise interest on arrear amounts and at what rate such interest may be raised.

If the Application is granted, a Warrant of Execution is issued and served by the Sheriff on the Respondent, any occupiers of the immovable property, the Registrar of Deeds, the bondholder and the managing agents. Once the immovable property has been attached, a sale in execution is arranged. Once the immovable property is sold at auction, the property is transferred to the purchaser and upon registration of transfer, all arrear levies and other amounts, including legal fees incurred, are paid to the HOA by the purchaser, before a clearance certificate is issued.

Should the sale be unsuccessful (no interested purchasers or the bid at auction is declined by the bondholder), the HOA may consider proceeding with an Application for debt review (review of income and expenses), an Application for a garnishee order (attachment of rental) or an emoluments attachment order (attachment of salary / wages), or a Sequestration or Liquidation Application.

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6 comments on “Homeowners’ Associations – Levy collection from demand to execution

  1. Chantelle Visser
    January 25, 2017

    Hello,

    What recourse is there when a Member is a longstanding defaulter owing tens of thousands of rands in HOA levies and penalties, but is discovered to be under debt review? Does this change the collection process? Member has been handed over for collection and this is how the discovery was made.

    • Paddocks
      February 9, 2017

      Dear Chantelle,

      Thank you for your comment. We are more than happy to help, however we do not give free opinions / advice. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.

      Kind regards,
      Paddocks

  2. Just Property Group Just Property Group
    September 29, 2016

    Good day.

    Can you please specify the rules on voting at a annual AGM when in arrears with your levies?

    • Paddocks
      November 1, 2016

      Hi there,

      Thank you for your comment. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.

      Kind regards,
      Paddocks

  3. Alice Richards
    December 3, 2015

    Hi – can all of the above be applied in the case of Body Corporate ownership or are there different requirements/stipulations ?

    • Paddocks
      December 3, 2015

      Hi Alice,

      Yes it can. The reference will be made to the Sectional Titles Act and rules as opposed to the Companies Act, MOI and Constitution.

      Best,
      Paddocks

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