SECTIONAL TITLE MATTERS! ARREAR LEVIES AND THE THREAT OF SEQUESTRATION!
Failure to pay your levies can have exceptionally dire consequences . Did you know that a Body Corporate can apply to court for an owner to be liquidated (if the owner is a company) or sequestrated (if the owner is a natural person)?
As you know it is the Trustees duty to collect levies from owners of units in a scheme.
Levies are used to pay for the expenses of a scheme, which range from normal repairs and maintenance to electricity and water consumed on the common property, staff salaries, auditor’s fees for the annual audit, monthly management fees and so on – all the costs and expenses that are required to run a scheme on a day-to-day basis.
In the normal course, if an owner is in arrears with his or her levies a letter of demand is issued giving the owner 7 days notice to pay outstanding levies due. If the levies aren’t paid within that time summons is issued against the owner.
In some instances though, a Body Corporate may prefer to apply to Court to sequestrate the estate of a unit owner, which, if successful will have very serious consequences for that owner – consequences that should rather be avoided.
The person who has been declared insolvent has to wait for 5 years before he can apply to Court to have the Order uplifted. The other alternative is for him to wait for a period of 10 years to pass whereafter he is considered to be automatically rehabilitated.
If sequestrated, the insolvent person:
- Cannot enter into contracts to sell his movable or immovable property – only the Curator appointed by the Court can sell for him;
- He can’t incur further debt;
- He cannot be a trader who is a general dealer or a manufacturer, nor have any interest in such a business without his Curator’s consent.
As you can imagine being insolvent seriously affects your life and your reputation.
However, before a court will grant a sequestration application the Body Corporate must prove that an owner has committed what the Insolvency Act refers to as an “Act of Insolvency”. Examples of acts of insolvency are:
- If an owner makes or offers to make an arrangement with the Body Corporate that releases him partially from his debt; or
- Where an owner gives notice to the Body Corporate that he can’t pay his debts.
The Act also stipulates 6 other acts of insolvency.
In the current economic climate people sometimes can’t help falling into arrears with their levies.
If this happens don’t just keep quiet – approach the Trustees to make payment arrangements or you will face the wrath of Body Corporate.
You certainly do not want to face possible sequestration proceedings against you!
I hope you found today’s blog informative.
