Sectional Title | Collection of arrears levies and utility bills
UTILITY DISCONNECTION APPLICATION
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 three months in the Magistrates Court to obtain a default judgment, or even worse litigating for over two years on trial in an attempt to recover a trivial amount of money, cannot be the best option. In that time period, the arrears 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 premises due to non-payment of the levies or utility accounts. We sent to the defaulting owners a letter 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 not only immediately alleviate the Body Corporate’s financial burden, but also place them in a position to mitigate their damages.
The application included multiple claims:
1. A money judgment on the full outstanding amount, being R67 937.58, an order, that should the owners not settle the debt immediately;
2. 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;
3. as well as a claim for payment of legal costs.
The Application was served on the defaulting sectional title owners on 29 September 2015 and was heard in Court on 11 November 2015, this was a six-week process. This was clearly 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 Body Corporate to appoint a contractor to disconnect the electricity supply to the premises, unless the owners made payment of the full outstanding amount in respect of electricity. The Body Corporate was also authorised to restrict or limit the water supply to the premises to 6 000 litres per month, unless the owners made payment of the full arrears amount in respect hereof. The Court also ordered the Body Corporate 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 mitigate their damages, but this also means that a Warrant of Execution can be issued immediately in respect of these outstanding amounts.
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.
From a cost perspective, the utility disconnection application can be used as a substitute for a summons as the Body Corporate obtains a money judgment together with the order for disconnection of utilities. Contact us to find out if your situation qualifies for a utility disconnection application.