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Excessive levy clearance fees?

29 April 2004

A query from Stian Dreyer of Silberbauers Brits Attorneys in Bellville reads:
"Today I was confronted with a levy clearance fee issued by a body corporate (not a managing agent) amounting to R800. This is robbery for a certificate issued by a body corporate in facilitation of their own interest of getting paid. I cannot commend paying such excessive fees, it amounts to an excess of R1,600 per hour for fulfilment of an administrative function and is an abuse."

The reply to my request for further information is worth reproducing here.

1. Managing agents normally charge a fee for this function. As far as I am aware all body corporates do as well. The average is about R300 to R400. I am not aware of any legal basis for this and would regard this function as part of the body corporate's duties. After all, the body corporate, represented by the trustees, consists of the individual owners and as such should provide this service to its members in order to facilitate transfer and ensure that the levies are paid when ownership passes. This is similar to rates clearance from the Municipality.

I am not opposed to reimbursing administrative costs for printing, clearance, liaising, etc., but in practice this has in some cases developed into a money printing exercise since conveyancers must certify in terms of Section 15B of the Sectional Title Act.

2. Section 15B3 provides as follows:

"The registrar shall not register a transfer of a unit or of an undivided share therein, unless there is produced to him-
(a) a conveyancer's certificate confirming that as at date of registration-
(i) (aa) if a body corporate is deemed to be established in terms of section
36 (1), that body corporate has certified that all moneys due to the body corporate by the transferor in respect of the said unit have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof; or
(bb) if a body corporate is not deemed to be established, no moneys are payable;"

3. It seems the body corporate is therefore in absolute control and in the absence of any formal regulatory body can act at will to the financial detriment of its members that are now leaving the community.

4. I am not familiar with whether the body corporate is entitled to charge a fee for this or whether it is part of their duties in terms of section 37 of the Sectional Titles Act. I would think that while the body corporate is administering it and while a trustee may not be remunerated it should be regarded as part of its functions.

How is one supposed to settle a levy account if it is not communicated? I believe conveyancers owe it to their clients to offer some resistance to such practices. Can a body corporate refuse to issue a certificate if one does not accept the fee because it is too much? Or should attorneys not question it and by default not act on behalf of the seller and purchaser in effecting a transfer of property in fulfilment of their conveyancing duties?

What is the feeling of the conveyancing community regarding such practices?

Stian Dreyer
SILBERBAUERS BRITS ATTORNEYS
P O BOX 213, BELLVILLE, 7535, SOUTH AFRICA
Tel: +27 21 946 1127
Fax: +27 21 946 3998 Email: sdreyer@sblaw.co.za

Reader Comments: 15
Chris Fick 29/04/2004:

I believe that there is a duty on the Body Corporate to supply the certificate but that a fee of R800,00 is exhorbitant. I feel that the Body Corporate is entitled to charge a fee to cover its disbursements

AJ du Plessis 29/04/2004:

This is outrageous. If the body corporate is allowed to charge R800,00,in Bloem its between R200-R250 haai shame, for a simple levy certificate, the conveyancer could possibly charge around R30 000,00 plus VAT for the transfer. How can you live with your own conscience sir?

E DE KOCK 29/04/2004:

In average I think the Body Corporate's rates are a total rip off and somebody should certainly make a plan with these people playing around with there fees.

Morkel Olivier P du Toit Attorneys Strand

Harry Friedland 29/04/2004:

Conveyancers are routinely blamed for the high cost of property transfers, with the lay public assuming that cost = fees. In fact, a very useful pie graph was recently published which graphically illustrated the chief culprits to be transfer duty and agent's commissions. Nevertheless, the media - spurred on by the estate agency lobby - constantly encourage the public to challenge their attorneys to "discount" their fees in property transfers, regardless of the fact that it is invariably the legal profession which carries the can when transfers go bad.

The situation is aggravated by recent "riders" in the form of escalated bank charges on bond approvals (not only higher charges, but also charges for items not previously charged for); FICA compliance - which many attorneys are now charging extra for, as it consumes a considerable amount of time and paper if bank directives are taken seriously; deeds office registration fees; rates clearance "consultants" whose intervention is necessary because it is well nigh impossible to obtain a rates clearance in Cape Town or Jo'burg without them; the advent of annual sectional title levy clearances in place of the 1- to 2- month clearance which sufficed previously; and the Sectional Title Managing Agents' exhorbitant charges for issuing a single A4 piece of paper.

The most aggravating aspect of the Sectional Title Managing Agents' clearance charge is that by and large, their service is not particularly good - most of them cannot furnish a copy of the most recent annual financial statements without plenty of fuss and bother (and an extra charge), nor can they readily supply an accurate and up-to-date copy of the rules of the Body Corporate (which, by law, they should be able to do) (once again, at an extra charge). There is no uniform standard for the service which they render.

To the best of my knowledge there is no statutory basis for the charge which the Body Corporate makes for issuing a levy clearance certificate. The Act provides for a charge for issuing a copy of the Rules, but not for a clearance certificate: "inclusio unius, exclusio alterius" aught to apply.

Jurgens Tubb(Malherbe Hanekom prokureurs) 29/04/2004:

Ek stem saam dat bestuursliggame hierdie koste as deel van hul jaarlikse begrotng vir die bestuur per eiendom moet akkomodeer. Die kontrole ten opsigte van die redelikheid en haalbaarheid van die koste word in so 'n geval uitgeoefen deur die eienaars wat bedingindsmag het wanneer die bestuursliggaam aangestel en bemagtig word. Fooie vir die sertifikate behoort dan baie meer redelik te wees. Dit aan te veel dat eienaars 'n vaste bedrag beding wat die bestuursliggaaam per sertifikaat mag hef.

Ian Johnson 29/04/2004:

I had an instance in a new development where I opened the register, and after the establishment of the body corporate I subsequently was dealing with a further transaction and needed to obtain an levy clearance. At the inaugural meeting, the trustees who were appointed promptly refused to engage the services of the recommended managing agents then turned to me for assistance in the preparation of a standard levy clearance certificate which I did for them without rendering a fee.

Having done so, when I requested a clearance my draft certificate was returned to me by the Chairman with a statement of account demanding payment of around R500,00 for the clearance. Needless to say, a frank exchange of views ensued and my goodwill is no longer available to that Body Corporate.

As a profession we are now surrounded by scavengers feeding off the conveyancing process promising some service or other but in truth adding little of no real value.

J .O. Christie 30/04/2004:

Its time for these fees to be regulated. I cannot imagine a less onerous task than checking the ledger for levies and the issuing a simple clearance certificate which, more often than not contains errors or does not comply with the rules of the Body Corporate. I had an experience a while ago when I was transferring 4 units in a scheme and which consisted of a dwelling unit, 2 garages and a S/Quarters.

I wrote to the managing agents for the levy clearance and received from them 4 clearance certificates plus 4 separate accounts. All units were owned by the same transferor and I was transferring to the one purchaser. I declined to pay for 4 certificates and tendered payment for the cost of one certificate only.

Eurydice Stanton, STANTON ATTORNEYS, Randburg 30/04/2004:

I tend to agree with the view of Stian Dreyer. Personally, I have never encountered such an administration fee higher than R325, and even then I thought it was a touch on the high side for what requires to be done.

Graham Paddock 03/05/2004:

Section 37(3)(c) of the Sectional Titles Act obliges a body corporate, on the application of an owner or his/her agent, to certify in writing the extent to which such owner's levies have been paid. The principle of a body corporate charging a reasonable amount for the provision of administrative information is established in prescribed management rule 32, in relation to copies of the scheme's rules.

R800 is certainly more than most managing agents charge for issuing a levy clearance. In my view a scheme could decide to charge a fee for a particular administrative task that is not in any way related to the time or effort involved. It could even decide to charge an 'ad valorem' fee, and we as conveyancers would be hard put to argue the case against it. But given their fiduciary duties to all owners - including those who are on their way out of the scheme - I don't think that trustees have the power to charge whatever they like.

If the charge is to be 'unreasonable' in that it does not bear a relationship to the effort involved, this should be underpinned by a decision of owners in general meeting and preferably enshrined in a scheme rule so that the 'penalty' applies to all.

ATTORNEY ESTER RESNIK,JHB 05/05/2004:

I agree absolutely with your comments. 90% of the time managing agents overcharge and often they overcharge and are also inefficient I have no problem with them charging a nominal fee - R150 ?? but definitely not more than that

Stian Dreyer 06/05/2004:

I have read Graham Paddock's contribution with interest. It has prompted me to do a search in relation to authorisation granted to a body corporate to charge a fee for the duty under discussion. It is notable that Section 37(3)(c ) resorts under the duties of the Body Corporate and rightly so.

These are functions which are necessary to be performed by the Body Corporate in order to ensure effective administration and stand on the same footing as all the other functions in the particular section. It would be impossible to determine one's monthly obligation in respect of a levy if the levy is not communicated or account rendered. Would Mr Paddock's view result in authority for a Body Corporate to charge for attending to telephone enquiries in relation to accounts rendered or the sending thereof? Clearly this cannot be the intention.

I strongly submit that rule 32 of the management rules are not applicable since it clearly intends the availability of the rules of the scheme and hence the costs of providing same which one would assume would amount to a photocopy and attendance charge. The rule is specific and hence it is submitted there is little room for the extended interpretation advanced.

Of importance is rule 35 of the regulations published in terms of section 55 of the Act which I enclose for ease of reference:

" 35.   Fees of office.—(1)  The fees of office to be charged in respect of any act, matter, or thing required, or permitted, to be done in or in relation to a deeds registry shall be those as specified in the schedule of fees of office, published in terms of regulation 84 of the Regulations in terms of the Deeds Registries Act, 1937 (Act No. 47 of 1937), (Government Notice No. R. 474 of 29 March 1963)."

The issuance of levy clearance certificate is clearly an act performed in relation to the deeds registry with reference to the provisions of Sec 15B of Sectional Title Act and the certificate required and hence I submit that in the absence of any fee provided for, that no authority exists for a body corporate or for that matter an agent acting on its behalf to charge a fee for providing information in relation to Section 37(3) of the Sectional Titles Act.

Sara Scheiner 09/05/2004:

It has been my experience that people who own flats in formerly "white" suburbs are finding it extremely distasteful (to say the least) that people of colour are purchasing flats in their buildings. It would be struck down by the Constitutional Court if a body corporate were to incorporate in its rules some sort of provision for it to "approve" of prospective transferees and it has been my experience that by putting the acquisition of a flat financially out of the reach of low and middle income families, they achieve more or less the same desired result i.e. preventing low and middle income families from buying flats in their building.

Leighshé Hodson 20/05/2004:

As a managing agent, I tend to agree that the service in the industry is generally sloppy, but take offence to all managing agents being grouped into this category. It seems that transferring attorneys have no knowledge of the volume of paperwork dealt with by agents. The charge for the certificate is not only to issue an A4 piece of paper, but the time of a senior within the company to ensure that all figures provided are correct. Yes, R800 is exhorbitant but R150 is a pittance compared to attorney's charges and bearing in mind that Bodies Corporate pay managing agents the bare minumum to manage their schemes.

With regards to Mr Friedland's comment on charging for photcopying of rules etc. How is it that attorneys may charge for each and every piece of paper yet an agent may not? Assume an agent manages 60 schemes and there is a transfer in each, that is 60 copies of rules or Annual Financial statements (both of which have already been provided to each and every owner at no cost), this amounts to a lot of A4 pieces of paper.

With respect to the amounts charged for clearance certificates and/or copies of rules, insurance policies & Annual financial statements, the Institute of Estate Agents has in the past set recommended tariffs which most managing agents have adhered to.

Marcia du Pont 02/07/2004:

In short I feel that while a Body Corporate / Managing Agent issuing clearance certificates for units on behalf of a complex - not only is that Body Corporate / Managing Agent "in the service" of the said complex but should it take instructions from the complex and trustees regarding the issuing of this certificate and the costs asked therefore.

The trustees of a complex must give instructions to the costs and stop this process as it is obviously daylight robbery. Also the fees asked by a Managing Agent for the issue of the requested INSURANCE CERTIFICATE (they normally refuse that the Insurance Company issue these Insurance Certificate to claim the money for issuing same themselves).

IT IS IN THE HANDS OF EACH AND EVERY SECTIONAL AND ITS BOARD OF TRUSTEES TO DISCUSS THIS ON MEETING / ANNUAL GENERAL MEETINGS SO THAT ALL OWNERS CAN KNOW ABOUT THIS AS THEY ALL ARE THE PARTIES TO THIS PROBLEM AND THEY MUST TAKE THE FIRST STEP AND SAY NO : "WE FEEL THAT A FEE FOR SUCH AND SUCH DOCUMENT MUST BE LIMITED TO THIS OR THAT AMOUNT.

NEITHER OWNERS NOR SOME TRUSTEES KNOW ABOUT THIS PROBLEM AND ALSO THAT THEY ACTUALLY HAVE THE RIGHT TO GIVE THE NECESSARY ORDERS AND INSTRUCTIONS TO THE MANAGING AGENT HANDLING THEIR AFFAIRS - MAYBE THIS ISSUE CAN BE MENTIONED IN ONE OF THE OTHER NEWSPAPERS SO THAT ALL OWNERS OF SECTIONAL TITLES CAN KNOW WHAT IS GOING ON AND TO KNOW THEIR RIGHTS AND START TO WORK ON THIS PROBLEM. PRESENTLY IT IS A "BLANK CHEQUE" GIVEN TO A MANAGING AGENT TO HANDLE ANY MATTERS AND CLAIM WHATEVER AMOUNT OF FEE.

MARCIA DU PONT (TEL 082 421 8052)

Gerhard Bezuidenhout, Crescendo Estate Agent, Bfn: Oct 05, 2004 06/10/2004:

Regarding levy clearance cert's: Depending on the complexity of the request, the reasonable fee is around R220-R250. An extended certificate within two months will then draw 50% of the above. BUT : R800 for a standard certificate is exorbitant. There are some aspects, irrespective of who (agent or trustee, when the BC deals with admin themselves) which one must be aware of:

1. the request for a cert. is not routine business, although the process to produce it is (should be) standard. It adds value to the transaction by virtue of the necessity instigated by law.

2. The fee must be reasonable. In the absence of regulation the manager who operates on a time based fee, should be in a position to substantiate his fee, much as the conveyancer should when he prepares his account for Fees and expenses.

3. Most professions charge time-related fees. This service is also time related, and a charge per hour (max) inclusive of overheads, should be in order.

4. Since conveyancers sometimes wait until the last minute to request clearance, this places pressure on the managing agent, which may be charged for, especially when taking into account that the clearance will then be faxed and the original posted - even delivered by hand - as a follow up. These extras may be charged for, but it is more sound practice to charge an inclusive fee.

5. More often than not, there are requests for extension. Rendering of the clearance is not that simple, since a month or two later the figures are not the same and the process starts all over again. But to make a big deal out of it, is an overreaction by any administrator. A charge of 50% of the original fee for this repeat service seems to be in order. Of course this will create an impression that the (accumulated) fee is "high", but be reminded that the agent is at the mercy of the conveyancer and other functionaries: when they shout "jump", out comes the certificate.

6. It is not prudent to place the fee at the mercy of trustees, let alone the members of the body corporate, at the AGM. None of them is a party to any particular transaction (except their own when the time comes). A guideline for fees for ad hoc duties is probably under development: NAMA as coordinating body for managing agents, will deal with that aspect. But it is a valid question: is there any legal basis for charging a fee for this particular service? The rules of any scheme provides for the recoupment of cost of copies (of rules, financials) and provides for extracts to be made by interested parties at heir own cost. It is a pity that some legal technicality should be brought up under circumstances that a body corporate is to be blamed for the reason for this debate, and not actually the managing agents' profession.

7. I am tempted to air the following comment: why do critics not fire up in rage, when most (residential) property transactions involves thousands for the selling agent, thousands for the conveyancer, thousands for the mortgage registration, whilst the levy certificate is being charged for at "a pittance"? (!)

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