High court rulings strengthen the position of bodies corporate and landlords when hit by defaulting payers
Two recent High Court cases will make it a great deal more difficult to avoid the payments due on sectional title levies and rents, says Grant Gunston, Senior Director of Grant Gunston Attorneys.

“Recently,” he said, “there have been instances where defaulting body corporate members and/or defaulting sectional title tenants have applied for debt counselling – and the National Credit Act stipulates that where this happens the defaulting payer is entitled to a temporary moratorium on his payments in order to give him time to sort out his affairs.

“These new High Court rulings have exempted the landlords and bodies corporate from this ruling, taking us by and large back to the situation where non-payers are held to the contract they signed.”

In the first High Court case, Dlamini v the Body Corporate Frenoleen, the court ruled that the body corporate member had to find a way to pay his levies and make up the arrears despite being in debt counselling.

In the second case, Pareto v Kalnisha Sigaban (trading as KS Flowers ‘n More) the court again refused to exempt the tenant from payments because he or she was in debt counselling.

Gunston said that the decisions in both cases recognise the realities of the property market.

“We have to accept,” he said, “that in our society property has become a popular investment channel and that many of the investments are geared, i.e. bought with bonds. We also have to accept that bodies corporate are simply representatives of their members – they are not in most cases wealthy asset holders who can afford to carry their members and their water, electricity, sewerage and insurance payments.

“Similarly, bondholding investors can be seriously compromised by one or two months of non-payment, let alone the longer wait that often follows obtaining and putting into effect an expensive court eviction order.

“The new rulings are, therefore, welcome and in the long run will help to restart residential property development in South Africa, currently stagnating as a result of a lack of bank support for developers and the strict criteria of the National Credit Act.”

Article by: www.grantgunston.co.za