Is a body corporate protected from prescription of levy debts owed by its members?

The issue of whether a body corporate is shielded from the prescription of levy debts owed by members continues to be debated in the legal arena, with significant implications for sectional title schemes. A recent case, L.A. and Another v Body Corporate of London Place and Others (“London Place”), delivered by the Cape Town High Court, builds on principles that could have been raised in the earlier Body Corporate of Santa Fe v Bassonia Four Zero Seven CC (“Santa Fe”) had the latter case gone on appeal to the Supreme Court of Appeal (“the SCA”).

In legal terms, prescription refers to a debtor’s right to extinguish liability for a debt after a specified period, as outlined in the Prescription Act. For levy debts, the default prescription period is understood to be three years unless judicial actions, such as obtaining judgment, extend this period. But is it correct?

The Santa Fe case addressed whether levy debts claimed through liquidation proceedings interrupted prescription. The court ruled they did not, as such proceedings do not constitute a direct claim for payment under section 15 of the Prescription Act. This judgment, though procedurally accurate, left room for further scrutiny regarding the prescription of levy debts owed to a body corporate by operation of law/statute.

The body corporate appealed, arguing that judgment obtained in earlier proceedings extended prescription to 30 years for part of the debt, while section 13 of the Prescription Act delayed prescription for other portions due to the unit owner’s role in the body corporate (as a member of the governing body thereof). Despite compelling arguments, the SCA did not hear the case, leaving these principles untested at that level.

In 2024, the London Place case revisited these issues in the Cape Town High Court, focusing on whether unit owners or trustees qualify as members of a body corporate’s governing body for purposes of delaying prescription under sections 13(1)(e) and (i) of the Prescription Act. The High Court concluded that only trustees – not unit owners – constitute the governing body. This interpretation narrows the protective scope of these provisions, ignores the text, context and purpose of the relevant provisions and potentially leaves levy debts owed by non-trustee members vulnerable to prescription.

The High Court also referred to earlier judgments, such as Body Corporate of 22 West Road South v Ergold Property Number 8 CC, which reinforced this narrower view. However, critics argue that this approach fails to account for the collective governance role of unit owners in sectional title schemes under the Sectional Titles Schemes Management Act.

London Place was not taken further on appeal to the SCA.

These judgments highlight a critical need for bodies corporate to actively pursue levy debts to prevent prescription. While trustees are clearly within the scope of section 13 protections, unit owners may still wield substantial influence over levy debt enforcement. Legal practitioners are closely watching how these cases influence future disputes, particularly in schemes with complex governance structures or no governance structures.

The evolving jurisprudence on the prescription of sectional title levy debts underscores the importance of proactive debt management and robust legal strategy for bodies corporate. As demonstrated by the London Place case, courts are increasingly scrutinising the practical governance roles within sectional title schemes. Bodies corporate must ensure timely enforcement of levy debts to safeguard their financial stability.

However, if for whatever reason, a levy debt is ruled to have prescribed, there may still be room to argue that it hasn’t.

Download the full article written by our very own Fausto Di Palma, STS Chief Legal Officer and Adv. Viviana Vergano.

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