The approach to levy and utility collection in sectional title schemes has always been to deal with this as you would with any other type of debt collection. The debt collection process might seem more cost effective in the short term, but waiting for 3 months in the Magistrates Court to obtain a default judgment, or even worse litigating for over 2 years on trial in an attempt to recover a trivial amount of money, cannot be the best option. In that time period, the arrear levies have exponentially increased and the body corporate could be facing severe financial constraints, due to their arrears with the municipality.
We needed a solution to fast-track these types of collection matters, to ensure the health of the South African property industry. Thankfully, Michelle Dickens the MD of TPN, and the Chairperson of the Cathkin Peak South Body Corporate entrusted us with a test case, that could cause a major mind-shift in the way levy collections are done in South Africa. A body corporate would never be allowed, summarily and at their own prerogative, to disconnect utility supply to a premises due to non-payment of the utility accounts. We sent to the owners demanding payment of the full arrears within a 7 day period. Due to the owners’ failure to effect payment as demanded, a decision was made to approach the South Gauteng High Court with an application requesting the Court to grant an order that would immediately alleviate the Body Corporate’s financial burden, but also place them in a position to mitigate their damages.
The application included multiple claims, they were: a money judgment on the full outstanding amount, being R67 937.58, an order, that should the owners not settle the debt immediately, the Body Corporate would be allowed to mandate contractors to both terminate the supply of electricity to the premises and restrict the water supply to the premises, as well as a claim for payment of legal costs. The Application was served on the Respondents on 29 September 2015 and was heard in Court on 11 November 2015, this is was a 6 week process. It is very clear that this would be the quickest route to follow in matters where a body corporate is running into financial constraints due to non-payment of levies and utilities.
The application was successful and the Court authorised the Applicant to appoint a contractor to disconnect the electricity supply to the premises, unless the Respondents make payment of the full outstanding amount in respect of electricity. The Applicant was also authorised to restrict or limit the water supply to the premises to 6 000 litres per month, unless the Respondents make payment of the full arrear amount in respect hereof. The Court also ordered the Respondents to immediately make payment of the arrear amount, the effect of this is that not only can the Body Corporate immediately disconnect the utility supply in order to to mitigate their damages, but this also means that a Warrant of Execution can be issued immediately in respect of these outstanding amounts.
This order does not only change the way body corporates can collect arrear levies and utilities, but it does open the door for similar applications with regards to tenants refusing to pay utility supply to a rented property. This case ties in with the case of Anva Properties v End Street Entertainment Enterprises CC, where the Western Cape High Court ordered payment of outstanding amounts in respect of electricity supply to the premises, by a tenant in a commercial property. The Court did send a very strong message with the order made by Judge Mailula, in the Cathkin Peak South-case, with regards to residential properties. No body corporate, or for that matter, no person can be expected to subsidize the utility supply to a premises where the occupant of the premises is in fact obliged to refund the owner, or body corporate for the usage on the premises. If we have a look at the approach both Judges followed, it is clear that these type of orders would not be limited to commercial, retail and industrial properties, but the Courts would be willing to grant these type of orders with regards to residential properties.
This order, in no way or form allows an owner or body corporate to disconnect utility supply to a premises without a court order, it does however give an owner or body corporate a process to follow and obtain a real, legal opportunity to mitigate damages and collect outstanding amounts quicker and more effectively without running up an account with service providers that the owner would remain responsible for.
The Court also granted our request in respect of legal cost, on a scale as between attorney and client. We brought this application on a pro bono basis, because we believe creating this type of legal certainty in the property industry is without a doubt the duty of a law firm as dedicated to property law as we are.