In a recent judgment from the High Court in Durban, a unanimous decision at a Body Corporate meeting in 2016 to impose equal levies for all property owners, notwithstanding the size of their property, was overturned and declared invalid.
The Body Corporate of Kirtlington Park, who since its inception levied an equal amount of levy-contributions from all its members, and in 2016 formally adopted the "equal levy rule", is surely considering its legal options following a recent decision of the High Court in Durban.
Upon registration, as many Sectional Title Schemes do, Kirtlington lodged standard prescribed management rules in terms of which members are obligated to pay levies calculated according to the participation quota which, in turn, is calculated according to unit sizes. Kirtlington consists of 42 units ranging vastly in sizes from 251 square meters to 824 square meters.
In 2016, following years of disregarding its own management rules stating that its members will pay a levy contribution proportionate to unit sizes, the members of Kirtlington by unanimous resolution adopted its "equal levy rule" and sought to bring its management rules in alignment with the actual levies imposed on ground level. Noting this disparity, a member who acquired a unit in 2017 (after the "equal levy rule" had already been adopted), approached the High Court seeking that it be declared invalid.
Kirtlington argued that the property owner had no right to approach the Court for relief, because at the time of acquiring the unit in 2017, it had known about the equal levy rule and further that it was not a member at the time the rule was formally adopted in 2016. It further argued that the delay in bringing the matter before the Court is substantial and unacceptable.
Kirtlington further argued that it had imposed the "equal levy rule" since its inception and that the member cannot state that it is being adversely affected, as there had been no actual increase in levies and the rule amendment was a mere formality.
The member responded in arguing that, despite it having only acquired the unit after the rule had been formally adopted, the rule continues to have an adverse effect on it and other members, and that written consent is required before the relevant rule may have been amended as it may adversely affect the members. The member further argued that it merely seeks a declaration that the rule is invalid, and that there are no periods prescribed in which such relief must be sought.
The member stated that all members should have been made aware of the adverse effects the rule would have on them and that their consent must've been expressly requested before changing the rule.
The member further submitted that since acquiring the unit, it had always disputed the "equal levy rule", however continued to pay its levy according to its participation quota (i.e., R3,798 as opposed to the R 5 300.00 levied under the equal levy – rule).
The member concluded in stating that, should the Court not declare the imposing of equal levies invalid, members will continue to suffer harm.
Kirtlington on the other hand stated that should the Court declare the equal levy-rule invalid, it would have serious consequences and have a massive effect on everyone who was involved.
Kirtlington further argued that if the member did not like the rule, it should have never bought a unit in the scheme and that a unanimous resolution was passed by the members of Kirtlington in 2016.
The Court, in coming to its decision, relied on interpreting Section 32 of the Sectional Titles Act, 95 of 1986. The Court found that, because the member was required to pay more than what is required in terms of its own rule, it would result in adverse effects on any member. Written consent is therefore required from such affected members. The Court found that, neither the previous owner nor the current member had at any point consented to the adverse effects of the equal levy-rule.
The Court further dismissed the argument by Kirtlington that since its inception, it had effectively applied the equal levy-rule. The Court stated that "it cannot be that because the unlawful conduct has been going on for a considerably long time that it ceases to be unlawful and to have an adverse effect on the recipient of that conduct".
Kirtlington had further been found to have not taken any steps to correct the situation and has been informed of the disparity since 2017 by the member, and that the delay in the member's approach to the Court has caused no prejudice to Kirtlington.
The Court accordingly concluded that the 2016 equal levy-rule was invalid and directed Kirtlington to levy in accordance with the management rules as was adopted at the inception of the scheme, namely in relation to each member's participation quota which is based on the size of each unit.
It is imperative that body corporates consider and keep up to date with their own management rules and to consult its attorneys where a proposed amendment may affect its members adversely. Failure to adhere to its own rules and the prescribed legislation may lead to far reaching implications for both members and body corporates.
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