Q&A: What is the maximum interest on arrear sectional title levies?
Acting chief ombud for community schemes Ndivhuo Rabuli explains the process
Q: I’m in arrears on my levy. I pay R7,000 a month to cover the arrears. In February, the amount outstanding was R60,000, but after I paid R6,600 it reflected that I still owed R57,000. How do I find out if the arrear interest is correct on my account? What is the maximum interest that I can be charged on outstanding levies? — Name withheld
A: Ndivhuo Rabuli, acting chief ombud at the Community Schemes Ombud Service, responds:
The legal position in terms of the Sectional Titles Schemes Management Act 8 of 2011 (Management Rule 21(3)(c)) is the following: upon the authority of a written resolution by the trustees, a body corporate can charge interest on an overdue amount payable by a member, provided the interest rate does not exceed the maximum rate payable per annum by the National Credit Act (NCA), compounded monthly in arrears. This interest rate is 2% per annum, which is the interest rate payable on incidental credit agreements.
An agreement between a body corporate and each of its members, which comes into effect when you buy a unit in a sectional title scheme, falls into the category of an incidental credit agreement. It is defined by the NCA as an agreement for the provision of goods or services over time, in terms of which a fee, charge or interest becomes payable if the amount charged isn’t paid before a certain date.
It sounds simple, but a few criteria must be met before interest can be charged in terms of the act. The trustee resolution must be in writing and signed by the trustees. Within 14 days of the annual general meeting, the body corporate must give each member written notice of the contributions and charges due by that member for the forthcoming year and state the interest rate payable in respect of overdue contributions, among other things (Management Rule 25).
Before the promulgation of the Sectional Titles Schemes Management Act in 2016, the NCA had no bearing whatsoever on interest charged in sectional title schemes as a result of a 2010 unreported judgment of the KwaZulu-Natal High Court in Pietermaritzburg, in the matter of the Body Corporate of Frenoleen v Dlamini (case no. AR 611/09,11/ 03/2010).
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