Community scheme levy relief during Covid-19 – tips for scheme executives

With the current economic climate, many scheme executives are worried about the financial future of their sectional title scheme/homeowners’ association (“community scheme”). This is because some unit owners have lost their income due to the pandemic, which has resulted in them either falling behind on their levy payments or not being able to continue paying levies at all. Fortunately, several remedial actions can be taken to ease the financial pressures on unit owners who may be struggling.

It is important to note that even if a unit owner is struggling, they should not just unilaterally decide to stop paying levies, but should communicate with their scheme executives or managing agents to find out if there are any measures already in place to assist them.

It is worth noting that the legal action route is not always the best or the cheapest. In a sentiment carried out in terms of paragraph 12 of the Amendments to The Covid-19 Directives previously Issued by the CSOS, CSOS encourages scheme executives to enter into reasonable payment arrangements or relief plans with unit owners who were negatively impacted by COVID-19 in the short term.

The first thing that scheme executives can do is consider entering into a reasonable and short-term payment arrangement with unit owners. Along with their confirmation of affordability (per month) towards levy debt.

If the above-mentioned process contradicts the current and standing arrear levy collection instruction or credit policy of the community scheme, the scheme executives would have to issue an updated instruction or resolution to this effect and ensure their managing agent executes the same accordingly.

Scheme executives can pause interest on the outstanding amounts as well as collection fees and action, on the basis that the unit owner agrees to a payment arrangement with them (covering all collection fees incurred to date). This option can for example, only apply to those whose levy accounts were up to date before the instigation of the lockdown.

Scheme executives are also advised to include the above-mentioned/customised Covid relief procedure in their internal dispute resolution procedure and/or credit control policy. This way, they can guide their unit owners in respect of:

• who will qualify/can apply for the covid relief procedure;
• the procedure they need to follow if they want to apply for assistance in the payment of their levies;
• what documentation/proof will be required to support their application; and
• the procedure followed by the community scheme in the consideration of their application.

Subject to an agreed-upon payment arrangement, scheme executives can agree that the payment arrangement is reviewed within 3 or 6 months as the financial situation of the unit owner in question might have changed by then.

Alternatively, scheme executives can allow unit owners to catch up on their arrear levies by a designated date later in the year and not take any legal action against them for the collection of the arrears until that date, so there won’t be any extra costs added to what is owed.

For more information regarding these remedial solutions, contact the Sectional Title Solutions (“STS”) Legal Advisory team. It is essential to know that, although trustees and/or their managing agent can create relief, these remedial options will unfortunately also affect the scheme’s cash flow.

Should you foresee a cash flow problem, STS has a bespoke, immediate and ongoing levy funding facility to suit your community scheme. We aim to ultimately ensure financial sustainability and protect the unit owner’s value of their property investment. Our loans are repayable as and when the community scheme recovers its arrear levies from non-paying unit owners.