Few issues cause more frustration after transfer than the question: Who must pay the special levy, the Seller or the Purchaser?

Special levies in sectional title schemes are often raised unexpectedly to fund urgent repairs, capital projects, or shortfalls in the Body Corporate’s budget. When a property changes hands, determining who is responsible for these amounts can become a grey area and if not properly addressed in the sale agreement, it can lead to unnecessary disputes and delays in registration.

Understanding Special Levies

A special levy is an additional contribution imposed by a Body Corporate on sectional title owners to cover expenses that fall outside the ordinary annual budget, for example, replacing elevators, painting the complex, or repairing boundary walls.

In terms of section 3(3) of the Sectional Titles Schemes Management Act 8 of 2011 (STSMA), trustees may, by resolution, raise a special levy and determine the manner and period of payment. Once raised, the special levy becomes payable by the owner of the unit at the time the resolution is passed, unless the parties agree otherwise in writing.

The Legal Position

The key legal principle was confirmed in several High Court decisions:

The liability for payment of a special levy rests with the registered owner of the unit at the date on which the Body Corporate raises the levy.

This means:

• • If the Body Corporate passes the special levy before transfer, the Seller is responsible, even if the payment falls due after the date of transfer.
• • If the levy is raised after transfer, the Purchaser is responsible, as they are the registered owner at the time of imposition.

This position was supported in cases such as Body Corporate of Laguna Ridge v Dorse (1999 (2) SA 512 (D)), where the Court confirmed that the obligation arises when the levy is imposed, not when it becomes payable.

The Practical Problem

In reality, Managing Agents often apportion levies between the Seller and Purchaser by agreement and some sale agreements are silent on the issue. This ambiguity leads to friction, especially when:

• • The special levy is raised between signature of the offer to purchase and registration of transfer;
• • The Managing Agent refuses to issue a levy clearance certificate until the special levy is settled; or
• • The Purchaser only learns of the levy after taking occupation.

Because Conveyancers cannot register transfer without a levy clearance certificate, these disputes can cause significant delays and even financial loss.

Avoiding Disputes: Drafting and Due Diligence Tips

To prevent misunderstandings, both parties and their Attorneys, should address the matter expressly in the sale agreement. Here’s how:

1. 1. Include a clear clause:
   State explicitly who will be responsible for any special levies raised prior to transfer but payable thereafter.

For example:
“All special levies raised prior to registration of transfer, irrespective of when payable, shall be for the account of the Seller and all levies raised after registration of transfer shall be for the account of the Purchaser.”

2. 2. Request a levy statement early:
   Conveyancers should obtain an updated levy statement from the Body Corporate as soon as possible after the sale, to confirm whether any special levies have been raised or discussed.
3. 3. Ask for trustee meeting minutes:
   The minutes of recent Body Corporate meetings may reveal upcoming resolutions for special levies, allowing the parties to negotiate responsibility before signature.
4. 4. Ensure levy clearance is obtained early:
   Managing Agents are not obliged to issue a levy clearance certificate unless all amounts due to the Body Corporate are paid in full. Early coordination prevents last-minute surprises.
5. 5. Use the conveyancer’s trust account properly:
   Where there is uncertainty, parties can agree to hold an estimated amount in trust pending clarification of the liability, a practical safeguard against delay.

Conclusion

In summary, liability for special levies depends on timing, the crucial date being when the resolution is passed, not when payment is due. However, the safest approach is not to rely solely on the law, but to pre-empt disputes through careful drafting, transparent communication and early due diligence.

At Barnard we regularly assist Sellers, Purchasers and Managing Agents to navigate these complexities. By ensuring that levy responsibilities are clearly defined at the outset, we help clients avoid unnecessary friction, preserve goodwill and ensure a smooth and timely registration process.