The body corporate series

Authors: Kobus De Beer – Director


Can’t meet your financial obligations?



The saying “No good deed goes unpunished” is true when you agree to be a trustee of your body corporate. You thought to yourself, how difficult can it be? I will fix the body corporate. Famous last words....


You survived the internal lobbying at the AGM, and after your election you soon realise that the body corporate is not able to function properly. The bank account looks dismal, and creditors are on your case daily. With a myriad of factors that contributed to the current state of decay, you and your trustees are faced with issues that consume a large amount your time, from municipality billing issues, levy defaulters, levy and billing disputes, managing agent inefficiencies, and mismanagement. You turned to the managing agent for possible answers, with no success. In fact, they are heading for the hills.


There is light at the end of the tunnel. Section 16 of the Sectional Titles Schemes Management Act 8 of 2011 provides relief in the form of the appointment of an administrator by the Magistrates’ Court. This can be done by way of an application by the body corporate, the local municipality, a judgment creditor of the body corporate, or any owner or person having a registered real right in or over a unit.


The requirements for the body corporate to be placed under administration are that there is evidence of serious financial or administrative mismanagement and there is a reasonable probability that, if placed under administration, the body corporate will be able to meet its obligations and be properly managed.


The Act provides that the administrator is vested with the powers and duties of the body corporate as determined by the Magistrates’ Court and must exercise these powers to address the body corporate’s management problems as soon as reasonably possible.


This article deals in short with the administrators’ powers in respect of creditors and the municipality. Further instalments in the body corporate series will expound upon others, the administrator’s powers vis-à-vis the body corporate’s annual financial statements and the obligations in respect of the Community Scheme Ombud Service.


One of the main issues confronted by trustees and administrators is the payment of rates and taxes to the local municipality. Section 3 of the Act empowers the body corporate to establish and maintain an administrative fund to cover estimated operating costs, including repair and maintenance, and the payment of rates and taxes.


The owners of units in the body corporate are required to make contributions to this fund and an additional contribution must be levied to owners who are entitled to the exclusive use of a part or parts of the common property. These funds are raised by levying contributions on the owners in proportion to the quotas of their respective sections ("participation quotas”). Section 32 of the Sectional Titles Act 95 of 1986 prescribes this formula.


If you find yourself in a similar, unfortunate position, come and speak to us. Lawtons Africa may just be that light at the end of the tunnel.


 

Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com

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