Process of Collecting Outstanding Levies

TL;DR

The process of collecting outstanding levies in South Africa starts with clear billing and reminder notices, often including interest on late payments. If owners still fail to pay, estates can escalate by issuing a Letter of Demand, followed by court proceedings (summons, judgment, and possible property attachment) or applying through the Community Schemes Ombud Service (CSOS) for adjudication. All legal costs are recoverable from the defaulting owner, making early and decisive action essential to protect the estate’s financial health.

Levies are crucial for the smooth running and upkeep of community schemes, from security and maintenance to insurance and administrative expenses. But what happens when levies go unpaid? Below is a clear, step-by-step process of collecting outstanding levies, designed to help trustees and body corporates recover what's owed efficiently, professionally, and in full compliance with South African law.  

1. Levy Billing & Assessment

The process begins with establishing levy amounts and ensuring clear, timely billing:

• After each AGM (annual general meeting), trustees must pass a resolution approving both administrative and reserve fund budgets, as per Section 3(1)(a),(b) of the STSMA and informing all owners accordingly in writing.

• Levies are then billed monthly, in advance, typically due before the 1st of each month to avoid late interest or collection actions.

2. Reminder & Interest Procedures

When payments are late, collections should begin as early as possible:

• If a levy isn't paid by the 7th of the month, interest is automatically applied and backdated, and debt collection charges may be introduced, though many schemes delay charging these to keep costs lower.

• Clear, documented reminders help nudge payment and reduce the need for legal escalation.

3. Escalation via Letter of Demand

Should reminders fail to prompt payment:

• Attorneys issue a formal Letter of Demand, granting the owner typically 10 days to pay before legal action begins.

• This step is essential; it serves both as a courtesy and a legal prerequisite before launching court proceedings.

4. Court Proceedings: Summons to Judgment

The legal process continues via the courts if payment is still not forthcoming:

1. Summons: If no payment or response is made within 10 days, a summons is filed and served by the sheriff.

2. Default Judgment: If the owner doesn’t respond within 10 days, the court issues a default judgment.

3. Enforcement: A warrant of execution is obtained, allowing seizure of movable property. If service fails, tracing agents may be employed.

4. Property Execution: If necessary, a Section 66 application enables the attachment and sale of immovable property, such as the unit itself, at sheriff auction.

   
   

Legal costs incurred during this process are charged back to the defaulting owner—even if the matter goes to sale.

5. Using CSOS for Levy Recovery

Alternatively, schemes can use the Community Schemes Ombud Service (CSOS):

• Through Section 39(1)(e) of the CSOS Act, trustees can apply to CSOS for adjudication instead of direct court litigation.

• An order of CSOS is enforceable like a magistrate’s court judgment, but obtaining such an order is much more lengthy than through normal litigation, although it may be cheaper.

Once issued, the order is lodged at a magistrate’s court and enforced via Sheriff, just like a court judgment.

6. Legal Framework Governing Collection

Several key laws guide the process:

• Sectional Titles Schemes Management Act (STSMA) remains the primary regulation, especially Section 3(1)(c) on levy liability.

• Community Schemes Ombud Service Act (CSOS Act) governs the Ombud service and adjudication process.

• The older Sectional Titles Act (STA) still applies to transfer-related aspects, though STSMA now covers most levy law.

7. Summary Table: Levy Collection Process

Step	Action
1. Levy billing	Resolve at AGM; levy payable monthly in advance
2. Reminder & interest	Interest and charges applied after due date
3. Letter of Demand	14-day payment window
4. Court action	Summons → Default Judgment → Warrant → Property sale
5. CSOS route	Application → Adjudication → Enforcement
6. Legal basis	Governed by STSMA, CSOS Act, STA

FAQs About the Process of Collecting Outstanding Levies

What is the first step in levy collection?

Start with monthly billing, approved at the AGM, and ensure levies are clear, due before the 1st of each month to avoid interest or charges.

When does interest start applying?

If levies aren’t paid by the 7th, interest is backdated to the due date, and collection charges may begin, though often delayed for goodwill.

Is a Letter of Demand required before court?

Yes, typically 14 days must be granted for payment before issuing a summons.

What court steps follow a summons?

Owner gets 10 days to respond. If no response, a default judgment is granted, followed by enactment of a warrant, tracing, and potential auction of property.

Can CSOS be used instead of the court?

Yes. CSOS adjudication usually takes a few months, and orders are enforceable just like court judgments.

What legislation governs the collection process?

Key laws include the STSMA, CSOS Act, and to a lesser extent, the STA for conveyancing matters.

Who bears the legal costs of the collection process?

All costs associated with the collection process, including legal fees, tracing, and court actions, are recoverable from the defaulting owner.

Conclusion on the Process of Collecting Outstanding Levies

The process of collecting outstanding levies is clearly defined under South African law, offering both informal and formal options from reminders and demands to CSOS adjudication and court enforcement.

Jonker Vorster Attorneys specialises in guiding trustees and body corporates through this journey, protecting estates’ finances while keeping processes efficient, lawful, and effective.

Struggling with unpaid levies? Contact Jonker Vorster Attorneys for swift, effective recovery.