Q&A: How much can my body corporate charge me in interest?

Q: I inadvertently short-paid my levy and my body corporate is charging me interest at a rate of 30% a year on the amount in arrears. What is the maximum interest that can be charged on such an account? — Name withheld 

A: Trudie Broekmann, an attorney who specialises in consumer law at Broekmann Attorneys, replies:

In terms of regulations under the Sectional Titles Schemes Management Act, bodies corporate may charge interest on arrear levies, but the interest rate must not exceed the maximum interest rate as prescribed by regulations under the National Credit Act. The maximum rate applicable to an “incidental credit agreement” is 2% a month. Therefore, 24% a year is the maximum allowed by law.

However, in terms of the Consumer Protection Act (CPA), a body corporate is a supplier of goods and services to owners and tenants. As such, the levies charged by a body corporate must be reasonable, just and equitable. An interest rate of 24% — I would say anything higher than the prime rate — is unreasonable, unjust and inequitable, and therefore prohibited by the CPA. 

The CPA overrules the Sectional Titles Schemes Management Act’s regulations because the CPA states that a provision that extends greater protection to a consumer prevails over any contradictory provision. 

A body corporate is not supposed to be a profit-making enterprise, but rather work on cost recovery. 

The remedy is to report the body corporate to the National Consumer Commission.

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