Bodies corporate, here’s when you CAN’T sequestrate owners
In the recent case of the body corporate of Empire Gardens v Sithole, the body corporate applied for the sequestration of an owner in the sectional title scheme to recover their arrears levies after they had exhausted all other remedies.
The benefit of a sequestration order is that arrears levies would be considered a cost of realisation of the property and would be paid before any of the claims of other creditors were considered. Nedbank opposed the sequestration proceedings, as its monthly bond repayments were paid up to date. The bank argued that if the owner were to be sequestrated, the only creditor who would derive any benefit would be the body corporate.
The court refused the application for sequestration.
The provisions of the Insolvency Act require that the sequestration of a person must be to the benefit of his creditors as a whole. Since the only creditor to derive any benefit was the body corporate, the court could not provide the body corporate with immunity from the operation of the Insolvency Act.
This judgement leaves bodies corporate in a sticky situation. By law it is required to collect levies, but cannot always rely on the strongest fall-back position in the case of non-payment, which is the sale of the sectional title unit itself. In such a case, prevention is better than cure: Until the legislature changes the Insolvency Act to provide protection to bodies corporate in this situation, levy collection procedures need to be monitored closely to prevent any arrears situations.
Who is Tiaan van der Berg?
M.C. (Tiaan) van der Berg, BLC LLB LLM (UP) H. Dip Labour (UJ) Dip ADR (AFSA/UP), is an admitted attorney, conveyancer and notary, and the founding director of M.C. van der Berg Incorporated, a legal practice specialising in property law. He is also the co-director of Mcademy Training Institute.