Don’t get ambushed by the special levy trap

This week, local attorney, David, discusses the special levy trap.

July 19, 2019

Content provided 1 minute read

David’s Snippets (A collection of legal articles taken from real life in a conveyancing office.)

Special levy trap.

Special levies become binding on those persons who are owners of units in a sectional title scheme on the day the resolution imposing the levy is passed.

Therefore if the agreement is silent on the subject, then the seller bears all liability for the levy, as the seller was the owner on the date the levy was imposed. This applies even if the special levy was payable in instalments that extend past the date of transfer of ownership.

That’s the law of the situation.

However, here is where the trap lies. Special levies can be of two different types, namely those covering past expenditure of the Body Corporate (shortfalls) and those covering anticipated future cost (reserve funds).

Logically and in fairness, special levies to cover a shortfall should be paid by the seller, as the seller would have had the benefit of the expense. The opposite is true of a special levy creating a reserve fund, as the benefit of this will impact when the purchaser is owner; therefore he should pay.

Care should therefore be taken to deal with the two types of special levies imposing liability for each on the relevant party.

My suggested clause then as follows:-

Special levies

In the event that a special levy is payable to the Body Corporate over and above normal levies due by the owner of the unit, the Seller will be liable for payment of such levy if it relates to a debt incurred by the Body Corporate before the date of sale.
If the special levy is for creation of a reserve fund for some future expenditure of the Body Corporate, the Purchaser will pay and/ or accept responsibility for payment thereof.
The conveyancer shall investigate the history of any special levy when dealing with levy clearance and account to the parties appropriately in terms of the aforegoing provisions.