Update from Sectional Title specialist



One of the most significant aspects of Act No. 29 of 2003 is the amendment of subsection 37(2) to the effect that liability for all levies attaches to the person who was the registered owner when the levies were raised - by the passing of a trustee resolution to that effect, not by the person who owns when they become payable. This can create a problem when units are sold. The parties can pay the levies 'due' for the full financial year, i.e. pay the instalments before the dates they become 'payable' so no further amounts are due for the current financial year. (This is similar to the payment of rates to a local authority on transfer of a conventional property.) Alternatively, and with the body corporate's agreement, the liability for levies can be 'transferred' from the seller to the buyer. But the parties need first to establish clearly for what periods and for which type of levies each one will be liable. These arrangements are most logically made in the sale agreement. Here is an example of a clause that deals with the 'first' aspect, the apportionment of liability: · Liability for all ordinary Body Corporate levies payable in respect of the property for the Body Corporate's financial year current with the date of transfer shall be apportioned between the Seller and the Purchaser in proportion to their respective periods of [possession / ownership] of the property during that financial year. The Purchaser shall be responsible for the payment of any special levy declared by the Body Corporate in respect of the property after the date of [possession / transfer]. And here is a 'second part' for the position where there is no 'take-over' of responsibility required because the full amounts due to the body corporate for the current financial year and any special levies are paid before transfer: · Any annual or special levies due to the Body Corporate prior the registration of transfer, whether payable or not, shall be paid to the Seller's attorneys on request and paid over to the Body Corporate. But if the parties wish to avoid pre-payment, and on the basis that the Body Corporate will agree to the purchaser 'taking over' liability for the unpaid levies, here is an alternative for the 'second part' of the clause: · With effect from the date of transfer the Purchaser hereby assumes the Seller's obligation to pay the outstanding annual levies in instalments for the balance of the financial year and the unpaid instalments of any special levies. The Purchaser undertakes to pay such levies to the Body Corporate as and when they become payable as if s/he had been the registered owner when such levies were raised. If any such amounts are not paid on payment date, the Purchaser shall also be liable to the Body Corporate for any interest, penalties and legal costs which would have been payable in respect of the late payment of levies. This assumption of liability is made in favour of the Body Corporate which on acceptance of the benefits of this clause will be deemed to have released the Seller from its obligation to pay the levies with effect from the date of transfer. The sale agreement must provide for signature on behalf of the body corporate confirming the acceptance of those benefits - in the same manner that most agreements provide for the Estate Agent to accept the benefits of the commission agreement. Caution: The specimen clauses set out above are supplied without any warranties and, like all precedents, need to be adjusted to take account of the particular requirements of each deal. Graham Paddock, 15 March 2004 NEWSFLASH The updated Sectional Titles Act, the Regulations and Rules (the Rules in English and Afrikaans) are now available as a programme that operates on your computer at R25 per month plus VAT, i.e. R285 for the rest of 2003. The updated Act, Regulations and Rules are supplied as a programme which operates on a computer. The computer does not need to be linked to the Internet when the programme is operated. Text can be copied and printed. The programme expires at the end of each year. Email graham@grahampaddock.com or telephone (021) 686 8629 to order your copy.