Honest payers sometimes penalised when inefficient bodies corporate fall behind in payments

The latest Gunstons Attorneys online newsletter (which says the firm’s senior director, Grant Gunston, is proving surprisingly popular), contains an article headed “When the lights go out, even though you paid your account”. This has drawn a response from certain property owners in sectional title and group housing schemes who have ended up in exactly that predicament and who are highly frustrated by it.

Ulrik Strandvik, a Gunstons director, said that taking legal action in these cases is unlikely to help much because the situation usually comes about as a result of the body corporate not paying their rates and/or service charges – and a recent Supreme Court decision has confirmed that in these cases the municipality has the right to cut off services.

“The bottom line,” said Strandvik, “is that the municipality has the power to consolidate all accounts – for rates, services and other municipal taxes and levies.”

While it is true, said Strandvik, that accounts cannot be consolidated nor services cut if there is an outstanding dispute over an account, this only applies if the amount disputed is “properly specified” and if the dispute has been “properly raised” in writing with the municipality. If the dispute is simply a delaying tactic by the body corporate, it will not hold up the cut-off long.

“In SA today,” said Strandvik, “we estimate that over 20% of bodies corporate are experiencing financial hardship. If, therefore, you are planning to buy into a sectional title project, you must get hold of an audited copy of the accounts and accounting or legal advice on the soundness of the scheme.”

The good news, he added, is that, looking at the situation countrywide, sectional title remains the top performer in the residential property sector and experiences the best rental returns in relation to capital invested – so, provided you do your homework, this is a good asset class in which to be.

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Article from: www.gunstons.com