An owner can not legally withhold payment  to ‘set-off’ a debt he believes is owed to him by the HOA.

It is not allowed to “set-off” one debt for another. That can only be permitted once a matter has been adjudicated by an arbitrator or ruled for by a judge. An owner cannot decide to set-off what he considers to be the amount of his claim against the body corporate by withholding his levy payments.

He is obliged to continue paying his levies and must attempt to recover the money owed to him by the HAO as a seperate matter. He is off course free to follow the legal channels of litigation or declaring a dispute under PMR 71 and take the HOA to arbitration.

An owner cannot lawfully request levies to be refunded to him, unless he can prove that a part or whole of the levies were levied unlawfully by the HOA. (PMR 45)

The answer is no, because:

• It is not a credit Transaction; it is stipulated by the Act.
• The HOA is just recovering budgeted-for expenses it has to pay according to the Act.
• The HAO is no Credit Provider and the owner not a consumer.
• There is no “Agreement” between the 2 parties; it is a legal Agreement governed by the Act.
• Interest is paid in conjunction with the Act (Management Rule 31 (6); not as per agreement.

No. This statute is not applicable to levy collections, nor arrear levy collections.

The owner can not include the HOA as a creditor, due to above reasons. A HOA should oppose this, and immediately enter a claim towards the total outstanding amount.

Management Rule 31(5) provides that “An owner shall be liable for and pay all legal costs, including costs as between attorney and client, collection commission, expenses and other charges incurred by the body corporate in obtaining the recovery of arrear levies, or any other arrear amounts due and owing by such owner to the body corporate, or in enforcing compliance with these rules, the conduct rules or the Act.”

Conflicting High Court cases in the past posed a higher risk on HOA members in the case of liquidation or sequestration of neighbouring owners. Luckily, two recent Supreme Court cases changed that, and lead to collections in these cases to be much easier.

In short, when an insolvent owner’s estate is sold, the HOA can block transfer to the buyer until the arrebar levies are paid.  The arrears, held the Court, have to be paid to the HOA as a “cost of realisation of the property” – in other words, before bondholders and other creditors are paid.  If the sale price is high enough, the HOA will be paid in full before preferential creditors are paid.

Judgments previously delivered: 

The SCA held it was accepted that statutory embargoes served a vital and legitimate purpose as effective security for debt recovery in respect of municipal service fees, including contributions to bodies corporate for electricity and water, and rates and taxes etc.

The SCA found therefore that the embargo registered against the property’s title deed ‘carves out, or takes away’ from the owner’s dominium by restricting its ius disponendi (the right to dispose of a thing). Thus, it subtracted from the dominium of the land against which it was registered and was consequently a real right.

This means:

registered title conditions that prohibit the transfer of residential property without a clearance certificate or consent of a HOA, are thus enforceable in insolvencies and as a consequence the HOA is to be paid prior to any secured creditors.

This was previously not the case.

These judgments placed HOA’s on an equal ground with municipalities and bodies corporate who recovered rates, taxes and levies through provisions of the Municipal Systems Act 32 of 2000 and Sectional Title Act 95 of 1986.

This provided greater security to the members of HOA’s, who are no longer at risk of having to contribute to any shortfalls arising from outstanding levies deemed to be irrecoverable resulting from insolvencies.

YES! The generally accepted ranking of preferred creditors are municipalities first, then HOA’s and then banks holding the mortgage, followed by the rest. Sometimes HOA’s sign waivers in lieu of the banks to allow for smoother sale of the property, but this has more often than not proofed fatal, leaving the HOA to take on the fight.

Two recent court cases has put HOA’s back into a position where they can rely on case law to support their right to hold back a levy clearance certificate,  which effectively halts the transfer till levies are paid.

Liquidators wanting to sell a property in execution, now have to settle the levy amounts outstanding with the HOA, or reach an agreement with the HOA before they can sell the property.