Trustees of Deeland Park Body Corporate v N.N. Koekemoer

The applicant, the Trustees of Deeland Park Body Corporate, brought an application under section 38 of the Community Schemes Ombud Service Act 9 of 2011 seeking relief under section 39(1)(e) for payment of arrear levies and related charges owed by the respondent, N.N. Koekemoer, the registered owner of Unit 7 in the scheme. The body corporate alleged that the respondent had fallen into arrears on her levy account, despite receiving monthly levy statements, arrear reminder letters and final demands. It sought payment of the full outstanding amount of R119 501.25 as at May 2024, including interest at 18% per annum, together with various collection, debt collection and legal costs. The respondent did not dispute that the amount was owing. Instead, she explained that she and her household were under severe financial strain: she was the primary income earner, her husband worked on commission, they had medical and household expenses, and high levies had been exacerbated by municipal water-meter issues affecting the scheme. She contended that the 18% interest rate was unconscionable in the economic climate and said she had nevertheless been paying R6 000 per month since August 2023 and intended to continue doing so. The applicant furnished a signed mandate authorising its managing agent, an up-to-date levy history, and a trustees' resolution dated 3 April 2023 authorising interest on arrears at 18% per annum.

• Whether the respondent was indebted to the body corporate for arrear levies and ancillary amounts in the amount claimed.
• Whether the applicant had proved, on a balance of probabilities, its entitlement to payment under section 39(1)(e) of the CSOS Act.
• Whether the body corporate was entitled to charge interest at 18% per annum on arrear levies pursuant to a written trustees' resolution and the applicable management rules.
• Whether the adjudicator had jurisdiction under section 39 of the CSOS Act to award the applicant its costs of bringing the application and collection costs/disbursements.
• Whether debt collection charges and legal fees could be added to the respondent's levy account, and if so, to what extent.
• What payment terms should be ordered in light of the respondent's admitted indebtedness and financial circumstances.

Application partly upheld. The adjudicator declared that the respondent owed the applicant R119 501.25, including interest at 18% per annum as at May 2024, in respect of levies and ancillary amounts. The amount was ordered to be paid in 18 equal monthly instalments of R6 638.96, commencing on 1 June 2024, with subsequent payments due on the first business day of each month. The respondent was also ordered to continue paying current monthly levies and ancillary charges. If she defaulted on any one payment, the full amount would become immediately due and payable. The prayers for the costs of bringing the CSOS application and collection disbursements were dismissed, prayer 5 regarding debt-collector charges was granted, prayer 6 for legal costs as charged was dismissed save that only taxed or agreed legal fees may be added and untaxed fees must be removed, and there was no order as to costs.

A body corporate established under the STSMA is entitled and obliged to recover arrear levies and ancillary charges from a unit owner who has defaulted, because those contributions are necessary for the administration, maintenance and financial viability of the scheme. Where the owner does not dispute the indebtedness and the body corporate proves the arrears on a balance of probabilities, a payment order under section 39(1)(e) of the CSOS Act is competent. Interest on arrear levies may validly be charged where authorised by a written trustees' resolution in accordance with the applicable management rules, and such interest is compensatory rather than penal. However, a CSOS adjudicator may grant only the forms of relief authorised by section 39 of the CSOS Act, and legal fees may be added to a levy account only if they are taxed or agreed in terms of the prescribed management rules.

The adjudicator expressed sympathy for the respondent's financial hardship and observed that it was regrettable that she and her family were experiencing financial strain. The adjudicator also remarked that the body corporate must be managed like a business and that other members may be viewed as akin to shareholders whose interests are prejudiced when one owner does not pay. In addition, the adjudicator urged the respondent to view interest not as punishment but as a mechanism to preserve the value of the debt. These comments were explanatory and contextual rather than strictly necessary to the outcome.

The decision is significant in the community schemes context because it reaffirms that sectional title owners are obliged to pay levies and ancillary charges irrespective of personal financial hardship, and that body corporates must enforce levy collection to fulfil their statutory functions under the STSMA. It also confirms that CSOS adjudicators may grant payment orders for arrear levies and recognise contractually/rule-authorised interest, but their remedial powers are limited by section 39 of the CSOS Act and do not extend to every category of litigation or collection cost sought by an applicant. The order further illustrates a pragmatic use of instalment arrangements in CSOS adjudication while preserving the body corporate's right to accelerate the debt on default.