Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Levy clearance

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By Zerlinda van der Merwe

When a body corporate finds itself in a position where members are in arrears with their levies, contributions and other amounts as raised on their levy accounts, its trump card is the levy clearance certificate. The body corporate is entitled to withhold the levy clearance certificate, in terms of section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 (“the STA”), until such time as all moneys due to the body corporate, by the seller in respect of a unit, have been paid or an arrangement for payment of these arrear amounts has been made to the satisfaction of the body corporate.

However, it is not the body corporate’s levy clearance certificate that is required to be produced to the Registrar of Deeds by the conveyancing attorney attending to the transfer, but rather a conveyancer’s certificate, in terms of section 15B(3)(a) of the STA. This certificate of the conveyancer confirms that as at the date of registration of the transfer from the seller to the buyer, all moneys due to the body corporate by the seller in respect of a unit have been paid or an arrangement for payment has been made to the satisfaction of the body corporate.

Many bodies corporate use the levy clearance certificate, required by a member to effect transfer, as a bargaining chip in order to force the member to comply with any breach of the scheme’s registered management and/or conduct rules. However, as can be seen from the wording of section 15B(3)(a)(i)(aa) of the STA, a levy clearance certificate clearly relates to moneys due and payable to the body corporate, and not a breach of the scheme’s rules or even the provisions of the STA and the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”) and the Regulations thereto.

Should a member require the proceeds of the sale to satisfy its indebtedness to the body corporate, it may make arrangements with the trustees to their satisfaction. An example of such an arrangement may be the provision of an irrevocable undertaking from the conveyancer attending to the transfer that upon registration of transfer of the unit, the moneys due to the body corporate will be paid before the proceeds of the sale are released to the seller.

The issuing of levy clearance certificates is normally undertaken by the managing agent of the scheme, who is duly authorised to sign the certificate in terms of Prescribed Management Rule 10(1)(a) of Annexure 1 of the Regulations to the STSMA. The managing agent, in terms of their management agreement, may charge an administrative fee for preparing and issuing a levy clearance certificate. Alternatively, the certificate must be signed by two trustees, who are not disqualified from doing so.

During the transfer of the unit, the conveyancer will request from the body corporate clearance figures until the estimated date of registration of transfer. These clearance figures will include the normal and special levies to be raised up until the estimated date of registration of transfer, all arrear levies, interest, legal fees, and other charges, including if applicable the managing agents administrative fee. Purchasers will be liable for a pro rata portion of the normal and special levy, calculated according to the date of registration of transfer.

Should you have any queries relating to this topic, or require our services to draft or review your scheme’s levy clearance certificate or irrevocable undertaking, contact us via email at consulting@paddocks.co.za or telephonically on 021 686 3950.

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