Behind the allure of manicured lawns, uniform paint and secure gates lies a reality that many homeowners may overlook: the financial obligations of levies. (Getty Images)
Many people are drawn to the benefits of estate living which promises enhanced security, well-maintained amenities and an exclusive lifestyle.
Behind the allure of manicured lawns, uniform paint and secure gates lies a reality that many homeowners may overlook: the financial obligations of levies.
These monthly payments, which fund everything from security to property maintenance, are essential to preserving the seamless lifestyle that gated communities promise. Yet, for some, falling behind on levies can lead to unexpected and serious consequences — even the risk of losing their home.
Estates make up just 7% of South Africa’s more than seven million registered residential properties, but account for 17% of the total market value, according to Lightstone Property. It estimates that there are about 440 000 properties in more than 5 000 estates across South Africa.
So, what does it really mean to live “beyond the gated walls”?
Levies: Quasi-tax or contractual obligation?
Levies can be viewed as a contractual obligation between the property owner and the body corporate or homeowners association (HOA).
Upon purchasing property in a communal scheme, the owner agrees to abide by the rules and regulations of the scheme, including the payment of levies. This creates a contractual relationship whereby the owner is obligated to contribute towards the maintenance and management of the common areas.
Levies may also be viewed as a quasi-tax, in that they are compulsory payments imposed on property owners by the governing entity for the benefit of the entire community.
In theory, levies ensure that all members of a community contribute equitably to the costs necessary for the maintenance and improvement of the property. But levies often go beyond mere maintenance.
Many body corporates impose levies to create reserve funds for future developments, improvements or contingencies.
This aspect introduces the notion that property owners are not only paying for current expenses but are contributing to the long-term enhancement of the property’s value. While this may seem reasonable in some contexts, it can become a source of tension.
Levies are not optional — they are as compulsory as municipal rates and taxes. Unlike other expenses that may be negotiable or deferred, levies are a recurring financial commitment that must be met to avoid legal repercussions.
Unlike owning a freestanding property, where maintenance of the property is at the owner’s discretion, estate levies are mandatory and non-negotiable, as regulated by section 3 of the Sectional Titles Schemes Management Act and for homeowners associations, their respective Memorandum of Incorporation.
Prior to approaching the courts, body corporates, HOA and property owners can approach the Community Schemes Ombud Service Act (CSOS) to raise any issues or concerns regarding levies.
The CSOS has the authority to adjudicate disputes and issue binding orders, including orders reducing or waiving levies in certain circumstances.
But the CSOS will generally not interfere with the imposition of levies unless there is evidence of mismanagement or unfairness in the way the levies are calculated or used.
For homeowners, understanding the legal consequences and communicating with their HOA or body corporate in cases of financial difficulty can often prevent such drastic outcomes. But, should arrears accumulate, the HOA or body corporate is well within its rights to recover the debt — even if that means the auction of the homeowner’s property.
Legal process
The process of recovering unpaid levies begins with the issuance of a letter of demand, as stipulated under regulation 25(1) and (2) of the Sectional Titles Schemes Management Act and section 56 of the Magistrate’s Court Act, 32 of 1944.
Although not mandatory, this step initiates the legal process informally and allows the plaintiff (the body corporate or HOA) to claim interest on the outstanding debt in addition to legal fees.
Homeowners are required to consent to interest resolutions that can go up to 24% interest (mandated by Management Rule 25, which obliges body corporates to collect interest on arrear levies.)
The letter of demand serves as a formal notice to the debtor, detailing the amount owed and the nature of the claim. The debtor is given 14 days to respond, either by making full payment or by entering into a payment arrangement. The letter can be sent via registered mail, served by the sheriff of the court, delivered by hand or sent by email.
If the debtor fails to respond within the given timeframe, the body corporate formally institutes legal proceedings by issuing a summons through the respective court in the jurisdiction where the estate is located.
The summons gives the debtor 10 business days to defend the action. If the debtor does not respond, the body corporate can apply for a default judgment from the court.
Once granted, the default judgment severely affects the debtor’s creditworthiness and allows the plaintiff to pursue various methods of debt recovery. The judgment remains valid for 30 years, providing ample time for the body corporate to enforce collection.
The next step involves issuing a warrant of execution against the debtor’s movable property. The sheriff, upon receiving the warrant, will visit the debtor’s address to demand payment. If the debtor cannot pay, the sheriff will list and potentially seize movable assets to be sold at a Sale in Execution. Often, this step prompts debtors to negotiate repayment arrangements to avoid losing their property.
If the sale of movable assets fails to satisfy the debt, the body corporate may resort to a section 66 application under the Magistrate’s Courts Act.
This application requests the court to declare the debtor’s immovable property executable. If approved, the property can be sold at auction to cover the outstanding levies. This is generally a last resort measure, taken only after all other recovery attempts have failed.
The possibility of losing one’s home because of unpaid levies is a stark reminder of the unforgiving nature of estate living’s financial obligations.
The auctioning of a property is not only a financial setback but also an emotional blow, stripping people of their homes and the sense of security they provide. For many, the home represents not only a significant financial investment but also a place of personal and familial significance.
The recent case of Mduduzi Zikalala in the high court in Pietermaritzburg has cast a spotlight on the often-unforgiving nature of levy payments in sectional title developments.
Zikalala, a homeowner in a Durban complex, found himself deep in arrears, unable to meet his levy obligations. Despite his efforts to negotiate and settle his outstanding debt, the body corporate opted for legal action, seeking not only the unpaid levies but also additional legal costs and interest.
The court’s decision to uphold the body corporate’s right to recover the full amount underscores the harsh reality faced by homeowners who fall behind.
Zikalala’s case is not an isolated one.
As levy requirements continue to rise across South Africa, more and more homeowners find themselves in similar situations, burdened by financial obligations that grow exponentially with the addition of interest and legal fees.
In Zikalala’s case, what began as unpaid levies quickly spiralled into a much larger debt due to the court’s allowance for legal costs and interest to be tacked on.
While the body corporate’s right to recover arrears is legally sound, this case illustrated the power imbalance between individual homeowners and body corporates, often leaving residents with limited recourse.
Once a homeowner falls behind on levy payments, the additional financial strain of legal costs and interest makes it even more difficult for them to catch up, potentially leading to the loss of their property.
Problem of escalating levies
One of the most significant problems regarding levies is their often-unchecked escalation. As places age or face unforeseen repairs or upgrades, levy amounts can increase dramatically.
This is particularly problematic when ambitious projects such as the installation of new security systems, major renovations or aesthetic upgrades are undertaken.
For owners, especially for retirees and those on fixed incomes, the perpetual financial obligation of levies can be particularly difficult.
Unlike a mortgage, which has a finite term, levies must be paid indefinitely, and they are subject to annual increases to keep pace with inflation and rising maintenance costs. This ongoing financial strain can significantly affect retirees who might have anticipated reduced housing expenses after paying off their mortgages.
Smart buying
Banks focus on a buyer’s ability to repay a home loan, overlooking levies as a key financial commitment for homeowners in sectional titles or HOAs.
Now, I’m not saying we should sharpen our pitchforks and abolish levies — they are essential for keeping estates pristine. It is thus suggested that banks, with guidance from body corporates, should factor in projected levy increases over a 10 to 20-year period to give buyers a realistic view of long-term commitments.
Additionally, new homeowners need more transparency and education about these costs, because many are unaware of potential levy increases.
Prospective buyers should review the estate’s financial health, including levy statements, budgets and HOA meeting minutes, to make informed decisions rather than being lured in by glossy advertisements of dream home living.
As property ownership within gated communities grows, so too does the importance of fair and compassionate policies that balance community needs with individual financial realities, ensuring that these communities remain accessible and sustainable for all who live within their walls.
Tia-Schae Ramparsad is an LLB (cum laude) and LLM graduate in corporate and business law from the University of Witwatersrand, is a candidate legal practitioner and independent legal analyst.