Owners of property investments who are involved in a dispute with the body corporate of their sectional title scheme should always choose the path of arbitration and not be tempted to hold back their levy payments.
Whatever the reason for the dispute, going to court must be avoided at all costs. It’s expensive and can result in a lengthy, drawn out process that could leave you in a much poorer position than where you started.
In the case, Mphigalale vs Body Corporate of Protea Estate and Another, the owner was found guilty of not paying levies by the arbitrator and then took the matter to court saying arbitration was an invalid process and he did not consent to it. The court’s decision referencing past case law was that the owner agreed to abide by the rules of the scheme when he purchased the property and was therefore obliged to go to arbitration in the event of a dispute.
While owners of property investments may feel entitled to withhold levy payments, for example like in this case where the issue in dispute was the levy amount, demanding that their gripe first be resolved before they pay another cent – this ultimately jeopardises the scheme’s financial wellbeing and is not in their own best interests.
The Prescribed Management Rules (PMR 71) lay down how disputes are to be settled. A first notice is issued, if no response is received then a second notice is sent and if the owner still doesn’t respond then the an arbitrator will be assigned by the Chief Registrar of Deeds. Should the owner not attend the arbitration, the process will still go ahead, without him.
When buying distressed properties and below market value properties, investors should always take care to do their due diligence on the sectional title scheme before signing on the dotted line. IGrow Wealth can guide investors, assisting them in making the right decisions and avoiding buying into the wrong property investments.
Arbitration is still the best and most cost-effective way to handle sectional title disputes as opposed to going to court and often waiting months for a resolution.
If you have a dispute, rather pay your levies or part thereof, possibly into a trust account to show your intention to pay once the matter is sorted out, and resolve the dispute amicably.
Trustees are obliged to take action against an owner who does not pay levies, and in protecting the scheme and doing their job should do so immediately. If arbitration fails and the owner continues not to pay, selling the unit in execution to recover the unpaid amounts could become necessary.
So when formulating your strategy on how to build a property investment portfolio that gives good yields and future capital appreciation, arm yourself with knowledge and make sure you understand exactly what you are buying into. IGrow offers a full property administration and management service, which includes levy collection and guiding you through any potentially difficult issues.