Important decision in the history of the South African sectional title industry



A High Court declaratory order issued this month may well turn out to contain the most important decision in the history of the South African sectional title industry.So says sectional title (ST) expert Bob Gauld, who explains that the order was issued in a case brought last week by the body corporate of Geovy Villa to challenge a bondholder's refusal to approve the sale in execution of a levy defaulter's unit.'The essence of the High Court order is that, for the purposes of section 66(2) of the Magistrate's Court Act, the first bond over an ST unit does not rank higher in order of preference than the body corporate's claim for money owed to it by the defaulting owner.'And the implications for the ST community are enormous, because it overcomes the lack of co-operation from banks that has prevented many bodies corporate from being able to implement effective debt collection programmes.'Gauld notes that very few ST levy defaulters ever defend court actions against them and that competent attorneys usually have little difficulty in obtaining default judgements, or orders for the sale in execution of the defaulter's unit.A persistent stumbling block, however, has been the requirement for banks holding the mortgages on these units to approve the sales in execution - and their general reluctance to do so.'Now, though, that obstacle has been removed and in my opinion, unless it is overturned on appeal, the Geovy Villa ruling will prove to be the most important yet for the ST community in this country.'The ruling, Gauld points out, is in line with the current tendency of the courts to recognise the vulnerability of bodies corporate and the need to provide them with more protection. And it certainly addresses the inequity of the situation in which bond-granters have the opportunity to assess the risk before lending any money, but bodies corporate have no say in the risks thrust upon them by those same bond-granters.• Managing agents and bodies corporate who would like to contribute to the legal costs of defending the ruling if it is taken on appeal should contact EY Stuart Inc at eystuart@satis.co.za, or by telephone at 012-322-2401. Money not used for this purpose will be refunded. Article: Property24 News - for the latest real estate news, visit www.property24.co.za