On 7 October 2016, the new Sectional Titles Schemes Management Act of 2011 came into force, changing things drastically. As a result of this legislation, bodies corporate are now compelled to make provision for reserve funds on an ongoing basis.
While sectional title schemes are now meant to have reserve funds In place, dealing with maintenance and repairs, there might still be instances (emergencies) where a special levy has had to be raised. But what happens if an owner couldn't afford to pay a Lump sum for the special and now effectively paying it off in installments, where the owner in question has decided to sell the unit?
Who is responsible for the remaining special levy installments?
The Sectional Titles Management Act (STSMA) is clear with regards to special levies and the collection thereof, and it is only by mutual agreement between the buyer, seller and body corporate that these provisions can be adjusted. The STSMA caters for special levies in Section 3 (3) and provides that:
Any special contribution becomes due on the passing of a resolution in this regard by the trustees of the body corporate levying such contribution and goes further to say that:
Provided that upon the change of ownership of a unit the successor in title becomes liable for the prorate payment of such contributions from the date of change of such ownership.
Where an installment plan is in place, the seller must make the estate agent and the potential buyer aware that the new owner will become responsible for the prorate special levy installments, from the date that the buyer takes transfer.
Provision should be made in the sale agreement to formalise the acceptance of the responsibility of the special levy installments from the date that the new owner takes occupation. .An easy example of how a special levy would be prorated, is if a unit is sold on the 1st of January, with a special levy resolution passed on the 2nd of January (payable in 12 equal-monthly installments) starting on the 1st of February.
Now, should the transfer of the unit is to take place on the 1st February for argument sake, then the new owner will take over payments of the special levy on that date. This means the new owner will pay 10 out of the 12 Installments as the original owner would have paid 2 of the installments by that stage.
Sale agreements of sectional title properties tend to stipulate that the purchaser becomes liable for special levies once transfer takes place and, as mentioned, It Is only by mutual agreement between the buyer, seller and body corporate that this condition can change. It is easier to stick to the standard way of doing things, and not deviate with complicated alterations to payment terms.