Legal Articles

Owners of units in sectional title schemes who habitually pay their levies late will be faced with paying interest on all the levies that are in arrears.

In the same way that trustees determine the levies for the year ahead during their annual general meeting, they also determine what interest rate will be applied to levies in arrears. However, if the trustees see it fit to do so, they may increase the interest rate by means of another resolution.

Body Corporate Rules – Sectional Title Scheme Levies

According to Prescribed Management rule 31, trustees are entitled to determine the amount of interest to be charged on overdue amounts as well as to recover said interest owed to the body corporate by the defaulting member.

This interest rate does not serve as an extra income stream for the body corporate. Instead it can be used as a tool to discourage members or owners from falling into arrears with their levy payments.

The trustees are not obliged to consult the members of the scheme when determining the percentage of interest that will be charged.

However, according to section 39 of the Sectional Title Act, the owners may direct the trustees to place a maximum limit on the interest rate. In order to do so, the owners will need to get a majority vote.

It’s important for trustees and owners to be aware that there is no law on what the maximum interest rate should be for late levy payments. However, a rate of 15.5% to 24% per annum is considered within reason.

Furthermore, trustees must be sure to state that the interest charged will be compounded while the duplum rule still applies. In other words, the interest charged may not exceed the total amount due. Therefore, when this limit has been reached, no more interest may be added to the account.

Van Deventer & Van Deventer Incorporated – Attorneys in Cape Town and Pretoria

Assistance with debt collection forms part of our comprehensive legal services in South Africa. Our attorneys are skilled with the legal processes involved with collecting levies in arrears.

For more information on how much interest can be charged by a body corporate on late levies, please contact our attorneys.