“…aye, there’s the rub” (Shakespeare)
Levies are the lifeblood of a sectional title scheme, and the Body Corporate has a duty to recover arrears from defaulting owners. It has the power, in addition to following standard debt collection procedures and perhaps approaching the Community Schemes Ombud for assistance, to apply for the sequestration of the owner’s estate. Indeed just the threat of a sequestration application is sometimes enough to frighten a recalcitrant debtor into paying up.
But, as Shakespeare might have put it, there’s an alarming “rub” here that body corporate trustees ignore at their peril. It arises from ‘the danger of contribution’ in insolvent estates. In a nutshell, where the ‘costs of sequestration’ exceed the funds in the estate available to pay them, proved creditors may well have to contribute towards those costs in addition to losing their claims. Talk about adding insult to injury!
The recent case of First Rand Bank Limited v Master of the High Court (Pretoria) and Others (53071/2016)  ZAGPPHC 236 illustrates.
A R46k shortfall – must the body corporate contribute?
The bottom line - trustees of bodies corporate should, before applying for a defaulting owner’s sequestration, make certain that there is no danger of contribution.
NOTE: For the sake of brevity and simplicity no mention is made in the article of the fact that the banks relied on their securities for satisfaction of their claims.
Jack Crook, Director at DotNews, is well known to law firms as the author of LawDotNews since 2005. Jack’s legal qualifications (LLB Lond and LLB Rhod) are supplemented by many years of practical experience in law, in marketing his own firm, and in helping other small and medium sized professional firms to prosper by using simple, low-cost, effective marketing strategies.
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