The man who disrupted outstanding levy collection
“John, did you see the email from the managing agent?”
“No, what email?”
“Basically, the body corporate has to raise a special levy. Something like R13,000.”
“Someone hasn’t been paying their levies.”
“Thirteen thousand rands’ worth?”
“Yes. So for the next 10 months my levy is going up by R216!”
“That’s so unfair! Why did they allow it get so high?”
“Not sure, but apparently the managing agents screwed up the whole levy collection process.”
Sectional title owners owe it to themselves, their fellow scheme owners and the health of the development itself to pay their levies, on time and in full each month – regardless of how unjustified the amount might seem. The reason is that a non-payment on a levy can compromise an entire complex – and all owners’ investments. It can result in the rejection of an insurance claim because premiums to the insurance company aren’t paid; and liquidity to the body corporate can be compromised. Good luck if lightning strikes the electric fence or if a strong gust of wind blows off the carport covers and damages a number of owners’ units.
A defaulting owner who refuses to pay his outstanding levy account will also more than likely not pay the special levy, leaving others in the scheme to clean up his mess.
Marlon Shevelew, one of South Africa’s top rental attorneys, believes the process of collecting outstanding levies in the sectional title arena is outdated. Credit bureaus and estate agencies which are able to send out letters of demand do not always understand the correct process that needs to be followed, how the letters need to be sent to defaulters, and that ultimately they assist in allowing debt to escalate.
The creator of RentDoc – an integrated, compliant outstanding rental collection service – has changed the game again, this time in the levy collection arena.
“With LevyDoc, the body corporate or managing agent takes five minutes to register for free on the site, fills out the checklist, and pays R50 to send the letter of demand – and every letter is personally vetted by me,” says Shevelew, explaining that for the full service of a formal letter of demand correctly prepared, signed off by him, sent to the owner by email and registered post, chased up a day before it’s due and reported back to the client will cost a body corporate R130. “When you ask an attorney to do the letter with all the information, he might open a file for which he might charge R200, another R250 for the letter and some more for reporting back to the client. It might come to between R500 and R700.”
This is a minimum saving of 76% for a body corporate!
Bodies corporate have teeth
Besides the fact that the legal arrears costs can be recouped from the owner, by the body corporate, how does a body corporate collect legal fees – let alone the outstanding levy amount – from defaulting owners?
“The sectional title act makes provision for legal fees which a body corporate will get back because it’s added onto the levy statement,” says Shevelew, noting that the owner will not be able to sell his unit without a levy clearance certificate. “If he doesn’t pay I can sue, and I will get judgement and I will get costs, because non levy payment is effectively indefensible.
“The nice thing is you always have the unit that is owned by the property owner as collateral so you know you’re going to get your money. It’s inevitable: Whether you go to liquidation or sequestration, there is always that collateral security that you’ve got an actual, immovable asset in place that can be sold to defray the levies that are owing.”
Propping up managing agents
Rental and managing agents have a fiduciary duty to look after their trustees; the trustees have a fiduciary duty to look after the owners in the complex.
“A managing agent that writes a levy demand letter on the instruction of the trustees of the body corporate for the time being, and who represents the owners of the body corporate, has the duty to ensure the letter is done correctly,” says Shevelew. “I’m not trying to subvert the role of a proper managing agent. What I’m doing is offering them an added service. I want a managing agent to say to the trustees at a body corporate meeting: ‘Listen guys, we’re now going to be using LevyDoc. With LevyDoc the letters will go out immediately, they’ll be correct, and for a total cost of R130 all letters will be sent by email, by registered mail, will be reported back to the day before the payment is due, and Marlon and his team will also chase the person if the payment is not made. All in favour?’ Wow!”
Shevelew says there will never be a situation where a letter of demand does not get vetted and sent within a day thanks to the highly automated process, and it takes the attorney from Marlon Shevelew and Associates all of 45 seconds to get the letter out.
“I do it personally because it’s my baby,” he says. “The bottom line is that if you ask any lawyer to do a letter of demand, you might wait a day or two and you’re going to pay a couple of hundred bucks. With LevyDoc, you won’t wait longer than a day for the letter to be prepared! If you do, I won’t charge for the letter. I want people to realise there’s a much simpler – and cheaper – way of instructing.”
This cannot be emphasised more simply than in the case of the maiden LevyDoc letter: Annette Laing Properties requested a letter for a body corporate where the owner owed R10,135.39. The body corporate chose that the letter should be emailed and sent by registered post; two days later the owner paid. The entire fee was less than R100 and more than R10,000 debt was collected.