The Body Corporate of Marsh Rose v Steinmuller and Others

In January 2018, Mr Steinmuller (first respondent) purchased unit 24 of the Marsh Rose sectional title scheme at a sale in execution conducted by the Sheriff of Halfway House at the instance of Standard Bank. Prior to the sale, the Body Corporate of Marsh Rose (appellant) had obtained a judgment against the previous owner for R43,380.09 which remained unpaid. The conditions of sale required the purchaser to pay all levies due to the body corporate. The body corporate provided clearance figures totaling R312,903.21 (later reconciled to R295,044.81), which included levies, water, sewerage, arrear costs, interest and legal fees. Mr Steinmuller refused to pay the full amount and demanded detailed documentation. He offered to pay R150,000 (later increased to R250,000) into his attorney's trust account as security. The body corporate refused to issue the clearance certificate required for transfer without full payment, relying on the embargo provision in section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986.

• Whether a purchaser at a sale in execution is entitled to challenge the amount payable to a body corporate under the section 15B(3)(a)(i)(aa) embargo provision
• Whether a court can compel a body corporate to issue a clearance certificate against provision of security in a disputed amount
• Whether the purchaser has legal standing to dispute amounts claimed by the body corporate
• The proper interpretation of section 15B(3)(a)(i)(aa) of the Sectional Titles Act in the context of a sale in execution
• Whether the body corporate has a claim against the purchaser or only against the registered owner
• The nature and extent of the statutory embargo provision and its operation

The appeal was upheld with costs, including costs of two counsel where employed. The order of the full court was set aside and replaced with an order upholding the appeal and setting aside the high court order, with the application being dismissed with costs. NAMA was granted leave to intervene as co-appellant. The first respondent was ordered to pay the costs occasioned by opposing the intervention application.

A purchaser at a sale in execution has no legal standing to challenge the amount claimed by a body corporate under the section 15B(3)(a)(i)(aa) embargo provision of the Sectional Titles Act. The contractual relationship arising from a sale in execution exists between the sheriff and the purchaser; the body corporate is not a party to it. The body corporate's statutory right to refuse to issue a clearance certificate until all monies due to it are paid (or satisfactory arrangements made) cannot be limited by the terms of a sale in execution agreement to which it is not a party. The purchaser's right to compel transfer operates against the sheriff, not the body corporate. The body corporate has no claim against a purchaser at a sale in execution but only against the registered owner of the unit in respect of charges and levies raised under the Act. A court cannot compel a body corporate to issue a clearance certificate against provision of security by a purchaser who has no legal interest in the dispute regarding amounts due to the body corporate.

The Court noted but did not decide the question of whether the phrase in section 15B(3)(a)(i)(aa) concerning provision being made "to the satisfaction of the body corporate" for payment encompasses the provision of security as may be regulated by a court for payment of a disputed amount. The Court observed this question did not need to be answered given its finding that the purchaser had no legal standing. The Court also commented on the purpose of execution proceedings, noting they are driven by the judgment creditor through the sheriff acting in an executive capacity, and that the sheriff has both the duty and implicit power to do everything necessary to effect transfer and to enforce the contract embodied in the conditions of sale. The judgment referenced the similar purpose served by embargo provisions in section 89(1) of the Insolvency Act and section 118 of the Municipal Systems Act, which ensure continued supply of services and economic viability of municipalities and bodies corporate.

This judgment clarifies the operation of the statutory embargo provision in section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986, particularly in the context of sales in execution. It establishes that a purchaser at a sale in execution has no standing to challenge amounts claimed by a body corporate under the embargo provision. The decision protects the vital purpose of the embargo provision as effective security for debt recovery by bodies corporate, ensuring their economic viability and sustainability. It confirms that the body corporate's statutory rights are not diminished by the terms of a sale in execution agreement to which it is not a party. The judgment reinforces that the embargo provision serves to compel payment by preventing the owner from giving transfer until debts to the body corporate are paid, and this protection extends to legal costs incurred in recovery. This case is significant for the sectional title and property management industry as it clarifies the respective rights and obligations of purchasers at execution sales, sheriffs, and bodies corporate.