Wednesday, December 19, 2018
   
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Change in law eases arrears recovery

Sectional title trustees and homeowners' association directors have welcomed a change in legislation that will make it easier for them to recover arrear levies from defaulting owners.

This change, made in terms of the Rules Board for Courts of Law Act of 1985, provides for a court to set a reserve price when a property is to be sold in execution of a debt judgment, says Andrew Schaefer, managing director Trafalgar property management company.

This will prevent banks from being able to unilaterally veto such sales and leave body corporates, homeowners' associations and local authorities with no way of giving effect to judgments they obtained for outstanding levies, rates and service charges, he says.

The possibility of banks doing this, Schaefer says, was illustrated in a case in the Gauteng High Court and the Supreme Court last year.

The body corporate of Empire Gardens, having tried other ways to recover unpaid levies from an owner in the scheme, eventually sought judgment for the debt, the attachment of the property and a sale in execution.

However, the sale was blocked by the bank holding the mortgage because the owner was not in arrears with bond repayments and the price offered for the property at the sheriff 's auction was much lower than the outstanding home loan balance.

When the body corporate tried to sequestrate the defaulting owner, the bank also successfully opposed that, on the grounds the body corporate would be the only creditor to benefit from such a move.

"Even after lengthy and costly court actions, the body corporate still had no way to collect the arrear levies, and no way to stop the owner from running up further arrears. This is not an uncommon occurrence ," says Schaefer.

In many cases, this has been "severely detrimental" to the interests of other owners, who have either had to pay higher levies to make up the shortfall created by the defaulting owners, or watch the value of their own investments undermined because their body corporate or homeowners' association had to cut back on maintenance and repairs to the complex.

"The new court rule provides for a reserve or minimum price to be set by the court that grants any debt judgment that will result in the sale in execution of a primary residence, which means the bank holding the bond on that property will have to accept any sale concluded at that price or more.

"As is the usual practice in such cases, the buyer will then settle the outstanding levies, so ownership of the property can be transferred, and the body corporate or homeowners' association will have recovered its debt."

Property
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