Non-payment of levies and arbitration

A case that was mentioned recently in a Smith Tabata Buchanan Boyes newsletter, Mphigalale v Body Corporate of Protea Estate and Another, which deals with a situation where the arbitrator found an owner guilty of non-payment of his levies but the owner then decided to go to court to fight the arbitrator’s decision, saying that he never consented to the arbitration. The court, however, confirmed that previous case law held that buyers in sectional title schemes are deemed to consent to the rules of the scheme, which includes the obligation to arbitrate disputes of any kind.

Michael Bauer, general manager of managing agents IHFM, said he had a similar case recently, where the owner had not paid his levies and refused to go to arbitration to settle the dispute. The arbitrator had found him guilty and the owner now wants to go to court to contest the decision.

Owners, said Bauer, must realise that this is going against the Prescribed Management Rules (PMR 71), which clearly states the processes by which disputes are settled. It starts by issuing a first notice to the guilty party. If there is no reaction to the notice, the second notice giving choices of arbitrators will be issued, and if the owner again doesn’t respond, the Chief Registrar of Deeds will appoint an arbitrator to deal with the matter.

“Non-reaction in this case is dealt with the same way as acceptance of the notices,” said Bauer.

“The dispute cannot be resolved if the guilty party does not turn up for the hearing and the arbitration process must go ahead, ignoring notices will not make the problem go away,” he said.

Owners must remember that non-payment of levies, no matter what the dispute is, is ultimately putting the scheme at risk because of the lack of funds coming in, he said.

Arbitration is still the most effective way of dealing with disputes in sectional title schemes, where decisions are made within an afternoon instead of weeks waiting for court dates and decisions. The other aspect to take into account is that it is cheaper to go to arbitration than to take someone to court.

“If you are disputing anything in your sectional title scheme,” said Bauer, “at least pay part of what you owe – whether to an attorney or into a trust account, just so that you can prove you want to make a payment towards what you owe when the issue is resolved.”

Withholding levy payments is not a solution to anything, unless there is a genuine financial problem, and the trustees will have to take action against those who do not pay with all the tools they have, including applying for a Section 66, to sell the unit in execution to recoup the unpaid levy amounts, said Bauer.

Trustees must be quick and decisive in acting, so that the problem is not exacerbated by too much time going by, which would then cause the amount of money to add up to huge sums, he said.

Article: www.sectionaltitlesa.co.za

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