Are You Obligated to Pay Arrear Levies When Purchasing a Sectional Title Unit? Part 2

Recently, the High Court and the Supreme Court of Appeal (SCA) were required to interpret Section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 in relation to a sale in execution in the case of the Body Corporate of Marsh Rose v Arno Steinmuller and others. The issue in the appeal is firstly, the statuses of the parties, consequently, whether the body corporate’s reliance on the statutory embargo is susceptible to challenge and secondly, the High Court’s order, which irrespective of the interpretation given to the embargo provision, cannot stand.

In 2018, Mr Steinmuller acquired a unit in a sectional title scheme at a sale in execution. The transfer was authorised by a court order that Standard Bank obtained against the registered owner of the unit. It’s important to note that, as per the Act, a body corporate is not considered an owner of property; it merely manages the common property on behalf of the individual owners. Simply put, the body corporate is not a party to the sale agreement.

The said sale was contingent upon the published conditions of sale, which described that the Purchaser was liable for certain payments including:

“All levies due to a Body Corporate in terms of the Sectional Titles Act, 1986…”

If a property is sold in execution, a contract is established between the sheriff, who executes the court order, and the purchaser, whose bid is approved. The execution creditor (Standard Bank) is thus also not a party to the agreement. The purchaser bears the responsibility to pay the purchase price and any additional amounts due to abide by the terms of the agreement. This is a contractual obligation.

The sheriff may enforce the terms of the sale agreement or seek cancellation of the transaction in accordance with rule 46(11) if a buyer fails to meet a condition of the sale. In this case, the terms of the sale stipulated that the sheriff would be entitled to recover levies that were due to the body corporate as part of the purchaser’s payment. This was the context in which the appeal needed to be resolved.

Mr. Steinmuller would only have an enforceable right if he had fulfilled his contractual duties under the terms of the agreement of sale. His right operates against the sheriff and not the body corporate. If Mr. Steinmuller’s contractual obligations are limited by the terms of sale, he might be able to demand that the sheriff grant transfer upon payment of that money. He cannot, however, insist that the body corporate accept his offered payment and, as a result, offer a clearance certificate that would allow the transfer to take place. The body corporate’s statutory power to refuse to issue a clearance certificate until all outstanding payments have been made cannot be limited by Mr Steinmuller’s contractual right to transfer.

A conveyancer’s certificate attesting to the fact that all money owed to the body corporate has been paid is required before the sheriff can grant transfer. Until the terms of the embargo are fulfilled, the body corporate would legally be able to refuse to deliver the certificate. The result is that Mr. Steinmuller is not a party to any disagreement that may exist conceptually about what is owed to the body corporate, he has no legal interest.

As a result, the SCA ordered that the High Court’s ruling be set aside and replaced with an order dismissing the application with costs, including the costs of two legal counsels where so employed. The court concluded that, with regards to the decision in Barnard NO v Regspersoon van Aminie en ’n ander, legal fees paid to recover money owed to the body corporate was protected by s15B(3)(a) of the Act.

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