Paying Strata Levies at Sale is a Bit Different in South Africa

The Body Corporate Marsh Rose v Steinmuller and Others (A5002/2020) [2021] ZAGPJHC 440

GoStrata’s CaseWatch is a short, sharp and easy-to-understand review of important and interesting Court and Tribunal decisions affecting Australian strata title stakeholders.

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Quick Read

This 2021 decision by the South African High Court is about a dispute in a strata title building between a strata buyer and the strata building over the payment of outstanding strata levies and other amounts before settlement.  After buying the strata lot at auction, the strata building demanded payment of strata levies, judgment amounts and unassessed legal costs it had incurred against the former owner before issuing a levy clearance certificate [that’s required to finalise sales].  The buyer and strata building could agree about the amounts and ended up in front of the High Court. The key issues were whether a security payment made under protests was acceptable, what amount of security was reasonable and whether the buyer had to pay judgment amounts and legal costs. After considering the Sectional Titles Act 95 of 1986 [the South African strata law] the High Court decided that the strata building had to establish what was properly due, not all the amounts claimed were payable by the buyer, and that the security offered was acceptable. So, the South African High Court has limited a strata building’s power to force strata buyers to pay for all amounts they incurred [or recovered under judgments] against former strata owners for recovering outstanding strata levies.  Although not directly relevant in Australia, the decision provides some useful lessons, including that when strata levy recover expenses [especially legal costs and judgment amounts] grow and become a significant proportion of the total due for strata lots, there’s going to be disputes about those expenses, costs and judgments between strata buildings, strata owners, financiers and strata buyers.

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Implications

The key implications of this strata case are as follows.

• What is due to a South African strata building is not whatever the strata building thinks and does not include unlawfully raised strata levies or other amounts that aren’t legally due.

• If a buyer makes an under protest payment that is less than claimed as security, the strata building must issue a levy clearance certificate if the payment is satisfactory.

• What is satisfactory depends on a range of criteria that are commercially based and to be reasonably and honestly applied.