Trustees of Riverside Park Body Corporate v K.W. Gradwell and F.G. Gradwell

The applicant, the Trustees of Riverside Park Body Corporate, brought a dispute-resolution application under section 38 of the Community Schemes Ombud Service Act 9 of 2011 against the respondents, K.W. Gradwell and F.G. Gradwell, the joint registered owners of Unit 13 in the sectional title scheme. The body corporate alleged that the respondents were in arrears with levy payments and ancillary charges despite monthly statements having been sent and the levies having been properly approved under the Sectional Titles Schemes Management Act 8 of 2011 and the scheme rules. The applicant sought payment of the full outstanding balance as at December 2023 in the amount of R10 285.96, including interest, an order that the respondents pay their levies monthly on the first day of each month, and legal fees incurred in bringing the matter to the CSOS. The respondents did not file any response despite being invited to do so. The applicant’s evidence included the approved budget, levy schedule, demand letter, trustee resolution authorising interest at 24% per annum on arrear levies, and the levy account statement. On scrutiny of the account, the adjudicator found that legal fees of R965.00 had been debited to the respondents’ account pursuant to a trustees’ resolution, without the respondents’ consent and without a court, adjudicator, or arbitral order.

• Whether the respondents were liable to the body corporate for arrear levies and ancillary amounts claimed on the account.
• Whether the applicant was entitled to charge interest on overdue levies under Management Rule 21(3)(c) of the STSMA.
• Whether legal fees debited to the respondents’ levy account pursuant to a trustees’ resolution were lawfully recoverable under Prescribed Management Rules 25(4) and 25(5).
• Whether a body corporate’s trustees may by resolution impose liability for legal costs in a manner inconsistent with or additional to the prescribed management rules.
• What relief was appropriate under section 39(1)(e) of the CSOS Act, including payment terms and future levy compliance.

Application partially upheld. The respondents were ordered, jointly and severally, to pay the applicant R9 320.96, including interest, being the claimed amount of R10 285.96 less unlawfully debited legal fees of R965.00. Payment was to be made over four consecutive monthly instalments of R2 330.24, commencing on 2 January 2024. In addition, the respondents were directed to pay the usual regular monthly levies and ancillary charges as reflected on the levy statements. If they defaulted on any one instalment, the full balance would become immediately due and payable with interest. The claim for legal fees was dismissed. There was no order as to costs.

A body corporate is entitled under the STSMA and the CSOS Act to recover duly approved arrear levies and authorised interest from unit owners who are in default. However, legal fees may not be debited to an owner’s account unless they are recoverable in terms of the Act or rules and comply with PMR 25(4) and 25(5), namely that such costs must be taxed or agreed by the member, or otherwise supported by the member’s consent or the authority of a judgment or order. A trustees’ resolution cannot validly amend, supplement, or override the prescribed management rules; any such attempt is invalid.

The adjudicator observed that owners who fail to pay levies are effectively subsidised by compliant owners and that the body corporate cannot fulfil its statutory functions without owners’ contributions. The adjudicator also remarked, with reference to authority, that interest on arrear amounts is not punitive but compensatory and serves to protect the value of the debt. In addition, the adjudicator noted that debt collection costs may be permissible where a managing agent is a registered debt collector and charges strictly in accordance with the Debt Collectors Act, although that observation was not the basis of the operative order.

The decision is significant in community schemes jurisprudence because it confirms both the enforceability of a body corporate’s statutory right to collect levies and interest, and the limits on a body corporate’s ability to load owners’ accounts with legal charges. It underscores that trustees cannot alter or supplement prescribed management rules by mere resolution, and that legal fees may only be debited where authorised by agreement, taxation, or a judgment/order in compliance with PMR 25(4) and 25(5). The ruling therefore illustrates the balance in South African sectional title law between enforcing owners’ levy obligations and protecting owners from unlawful charges on their levy accounts.