CSOS case files: No interest due on ‘1-day-late’ levy
A trustee of a sectional title development in Kyalami who took the body corporate to the Community Schemes Ombud after being charged a full month’s interest on his levy that he paid one day late has won his case.
Stressing that the matter was brought to the Ombud on a matter of principle, Patrick Poifo Matlhola, stated in his application for relief by the Community Schemes Ombud Service (CSOS) that he required a ruling as to whether the practice of charging interest on levy arrears was legal. He was charged R85.77 in interest.
“I need the interest amount charged to my account to be reversed and the correct amount charged. All the other owners affected by this should also get a credit” he wrote in his submission.
Mathlhola says that “levies are payable on the 1st of every month, however there is a grace period to the 7th of each month. I made my full levy payment of R3,430.62 on 8 August 2017 which technically is one day late. The net amount I have been charged is for the full month, 30 days (R3,430.62 x 2.5%).
“My contention is that I was one day late and I should pay interest for one day or at the most for seven days if there is a resolution that late payers don’t get the benefit of the 7 days grace period. This is not about the amount involved but about the principle of charging arrears interest; this affects every owner.”
Mathlhola submitted that at the complex’s November 2017 AGM the trustees sought ratification of the arrear interest conditions that prevailed in previous years, one of the conditions of which was: “the trustees agreed to implement a 2% interest on arrear balances. This is calculated on the outstanding balance as if the balance has been in arrears for 30 days based on the levies due and payable….”
The respondents, represented by Dan le Roux of managing agents Jepropman, advised CSOS that the resolution was passed at the first trustee meeting in January 2017. On 18 August 2017 Jepropman advised Mathlhola that “interest is charged at 2.5% from the 8th of each month” and a day later told him by email that “there is no apportionment of the interest based on days” and stated further that “to have to calculate how many days for each unit is late creates unnecessary work, we already give 8 days’ grace.”
On 22 August 2017 the trustees agreed that interest would be charged for the full month and that all owners would be informed at the upcoming AGM.
Adjudicator, K Mabaso agreed that the law allows bodies corporate to charge interest on arrear levies on the authority of a written trustee resolution as per Management Rule 21 (3).
“In terms of the said management rule, interest is payable per annum and compounded monthly in arrears. Such interest is collectable on the portion of levy which falls into arrears taking into account the method of payment adopted by the scheme. If levies are declared at the beginning of the year, they become due at such declaration. They, however, only become payable monthly over a period of 12 months.
“In the current scheme, levies only fall into arrears after the 7th day of each month. It therefore stands to reason that at the end of the 8th day the levies would be 1 day in arrears. As the arrears are calculatable per annum and compounded monthly in arrears, it follows that only interest of 1 day should be due and payable on levies that are 8 days overdue.
“As interest is calculated on a daily basis and not on an hourly basis, no interest is payable by the applicant as he affected payment during the day on the 8th day.”
Handing down his ruling on 12 June 2018, Mabaso ordered that the applicant should be refunded the R85.77 in interest plus the fee he paid to CSOS to hear his application. He ruled that the body corporate’s resolution of 29 November 2017 be set aside and he ordered the Wheatland body corporate “shall recover interest in compliance with Management rule 27 (3)”.
To read the full report of the application and the arbitrator’s adjudication order, see case CSOS 1275/GP/17 on the CSOS website
Words: Blake Wilkins