South African Sectional Title schemes and Homeowners’ Associations could possibly face financial trouble if homeowners do not start making up the levy payments that were deferred during the national lockdown.
Andrew Schaefer, MD of property management company Trafalgar, says that Sectional Title trustees and Homeowners’ Association will need to know how to collect arrear levies most efficiently and cost effectively.
“With many people being unable to work during the lockdown and others losing their jobs, trustees and directors were inundated with requests for levy reductions or deferments” he says. “And since this requires a new budget approved at a general meeting to reduce levies, most of these requests resulted in levy payments being deferred for three months, provided that the owner was up to date with their levy payments at the time an that they agreed to repay the deferred amounts by the end of the financial year.”
However, he says that all these schemes still had bills to pay for security, cleaning, gardening, and maintenance services in terms of their annual budgets. They also had to keep paying their insurance premiums, city council for services, the contributions to their own reserve funds and statutory payments to the office of the Community Housing Schemes Ombud (CSOS).
“And because most of them operate on very lean budgets as it is, the failure of even a few owners in each scheme to start repaying their deferred levies and making up the arrears now, will put the finances of the scheme – and the investments of all their fellow-owners – at severe risk.”
While it may be an unpleasant task, trustees or directors need to be prepared to start taking action to collect arrear levies. They should know thar this is most likely to be successful with the assistance of a professional managing agent who is registered with the National Debt Collectors Council which is a legal requirement for anyone collecting any kind of outstanding debt says Schaefer.
There are five alternative ways in which managing agents make arrear levy collections easier for trustees and directors:
- Efficient billing systems to ensure the monthly provision of detailed levy statements are always up to date. This drastically lessens the chance of owners who are in arrears being able to dispute what they owe as a ‘delaying tactic’.
- Existing systems and resources to manage ‘soft collections’ including repeated telephonic and email reminders to defaulters to pay their arrears, sending letters of demand at the correct intervals, keeping track of the collection costs, and concluding debt repayment plans where possible.
- Advising on debt collection via mediation or adjudication at CSOS which is provided for in the Sectional Title Schemes Management Act and may be preferable where the amount outstanding is not large. It is important to note that CSOS will not take on matters unless the trustees can show in writing that they have already tried to resolve the dispute internally. A paper trail created by a managing agent may be helpful.
- Being able to provide access to a panel of attorneys with expertise in debt collections through the courts and who charge lower rates. This is beneficial not only to the trustees and directors in terms of efficiency but also to the defaulters who must pay the legal costs of collections.
- Keeping track of any legal actions on behalf of the trustees or directors and advising them on the outcomes of debt judgements, property attachments and sheriffs’ auctions and the prospects for the debt recovery.
Professional managing agents can advise trustees and directors about various measures they might consider taking to inconvenience levy defaulters and to possibly induce them to pays says Schaefer. “For example, trustees may not, under any circumstances, disconnect the electricity or cold-water supply to any ST unit.”
“And unless their Conduct Rules make provision for such actions, they will also not be able to block access to a communal DSTV or internet connection, to communal facilities such as a swimming pool or tennis courts, or to biometric security systems that allow fast entrance to the complex” he concludes.