Resolutions, why bother??

Very often, levies are raised annually, and interest charged on overdue accounts, without any formal resolution having been passed. In general, we assume that because the vote at the AGM was yes, that is all there is to it.

This is a potentially grave error and could have you, as property professional, and your scheme facing serious risk!

The Law

In terms of the Sectional Titles Schemes Management Act, levies only become due and payable when a resolution has been passed to this effect. In particular Section 3(2) reads (my emphasis added):

Liability for contributions levied under any provision of subsection (1), save for special contributions contemplated by subsection (4), accrues from the passing of a resolution to that effect by the trustees of the body corporate, and….

Much the same approach can be seen in the Prescribed Management rules in respect of Interest, which reads as follows in PMR 21(3) (my emphasis added):

21 (3)  The body corporate may, on the authority of a written trustee resolution—

• charge interest on any overdue amount payable by a member to the body corporate; ……

It is therefore clear from the wording of the Act that no one can raise a levy, or interest in a scheme, unless they also have a signed trustee resolution. not one passed at the AGM!  (took out some words here to shorten

Why is this so important, and how do our courts view it?

In the most recent case, The Marsh Rose Body Corporate v Steinmuller & Others (A5002/2020) [2021] ZAGPJHC 440, which specifically dealt with a delinquent owner, who had his property repossessed by the bank and sold at auction, these issues became extremely important. In short, the Body Corporate refused to issue a clearance certificate because the purchaser refused to settle all amounts due. One would imagine this is correct and proper, however the court had a different view.

The court in its majority judgment, specifically made mention of the fact that the scheme did not have its house in order. It could not produce the necessary levy resolutions for the various financial years in question, nor could it produce any interest resolutions (as outlined above) To compound the issues further, interest was raised in excess of what was legally allowable by the scheme, and untaxed legal fees were added to the account, thus overinflating the alleged amounts due. The court placed great emphasis on these issues, and they helped the purchaser win the case.

This judgment, being the most recent on the topic has sent strong warning signals to property practitioners across the country and reiterates how important it is to act with due diligence, professionally and to ensure that your schemes are legally compliant.

Speak to us to find out how we can help YOU avoid these pitfalls and risks, and how we cant get your scheme compliant!