Clearance Certification

Withholding levy clearance certificates

When selling a property in a sectional title scheme a levy clearance certificate from the body corporate is needed by the seller in order for the transfer process to go ahead but some bodies corporate have been known to withhold levy clearance certificates, not just for non-payment of levies but for situations where there are unauthorised alterations to the unit being sold, says Michael Bauer, general manager of the property management company IHFM.

The levy clearance certificate issued by the body corporate is one that states “all moneys due to the body corporate by the transferor in respect of the said unit have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof” – this certificate is given to the transferring attorney who then issues a further certificate to the Registrar of Deeds, confirming that the body corporate has certified the necessary payments.

Without these the transfer cannot go through as they are requirements, according to Section 15 (3) of the Sectional Titles Act, and if the body corporate withholds the clearance certificate for any reason other than non-payment of the levies due, they can actually be challenged on this in court and potentially sued for damages by the seller, said Bauer.

If the owner of the unit being sold does not rectify the illegal alterations to his unit, the body corporate may have to arrange for the work to be done, at their expense and then after the work is complete, the owner would then, in effect, owe the body corporate money once again – this is a complicated situation which should be avoided, said Bauer.

The trustees of bodies corporate should be aware of what is happening in their scheme at all times and take action as soon as there is any transgression of the rules and enforce compliance, he said.

“If there are extensions to sections built, the trustees should know about them and failure to do anything about it could be seen as negligence,” said Bauer.

If, for whatever reason, an unauthorised extension is built and it only comes to the trustees’ attention at the time of sale, the answer is to take steps to notify the buyer that the compliance of the unit will become his responsibility on the transfer of the unit. It is then the buyer’s decision whether to go ahead with the purchase and take responsibility for the unit in its entirety.

“To hold back levy clearance certificates for any other reason than non-payment of levies,” said Bauer, “can put the body corporate at risk of being sued for damages should the sale of the property not go through. It is better to issue the clearance if all payments are up to date and deal with the illegal extension as a separate issue.”


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