Leveraging Levy Clearance Certificates

Obi-Wan Kenobi in Star Wars: A New Hope said, “Remember, the Force will be with you, always.” He was a legendary Jedi Master and gifted in the ways of the Force.[1] The Force should not be leveraged unjustly to manipulate unit owners into compliance with other laws and rules, especially when full payment of amounts owing to the body corporate are made, much like the Jedi are guided to use the Force for peace and protection, not control or manipulation.

The focus of this article hinges on a pivotal query: Can a body corporate refuse to issue a levy clearance certificate, even when all due payments have been made? This question was put before the Pretoria High Court in the matter of Tapuch v The Trustees For The Time Being of S H Body Corporate 3 and Others[2] (“Tapuch“), and demanded careful deconstruction by the court, in which the judgment (marked reportable) was delivered on 24 October 2022.

This dilemma is thrown into sharp focus when a unit owner is accused of contravening the conduct rules of the body corporate, or when they’re purportedly at odds with the laws governing the common property and improvements thereon.[3] The case presented a cocktail of private sectional title property rights, the legal obligation of unit owner and body corporate, and the authority of the body corporate as set out in the applicable law discussed below.

All amounts due to the body corporate from the unit owner (the seller) had been fully paid.[4] The body corporate put up a roadblock by declining to issue a levy clearance certificate to the seller. Left with little choice, the unit owner launched urgent legal action to secure a court order directing the body corporate and managing agent to issue and release the levy clearance certificate.[5] Subsequently, the body corporate acquiesced, by issuing a levy clearance certificate following the filing of the urgent application.[6] An olive branch was also extended in the form of a commitment made by the purchasers of the unit. They had professed their willingness to bear all costs associated with the submission of the as-built building plans, mentioned below, should such a need have arisen.[7] This gesture also led to the issuance of the “first levy clearance certificate”.[8]

As time went on, and events beyond the owner’s control unfolded, the need for an extended clearance certificate emerged as a prerequisite for the registration of the transfer of the unit.[9] In a move that brings us to the crux of this case, the body corporate adamantly refused to issue the extended clearance certificate and this refusal formed the cornerstone of the urgent application and the judgment that resulted.[10] The body corporate also threatened to withdraw the first levy clearance certificate.[11]

The body corporate asserted that the unit owner had neglected to provide approved as-built building plans.[12] The missing building plans pertained to a roof that the unit owner had constructed six years earlier, back in 2016.[13] The body corporate held the view that the municipality should have given the nod to the unit owner’s as-built building plans for this roof structure, before the levy clearance certificate can be issued.[14] Therefore, according to the body corporate, this perceived failure was a justifiable ground to withhold the levy clearance certificate until the unit owner submitted the required building plans.[15]

The body corporate also argued that their refusal to issue a levy clearance certificate was not only justifiable, but necessary, as the unit owner had failed to comply with a law linked to the common property or improvements on the common property.[16] The body corporate contended that trustees can withhold a levy clearance certificate to enforce building compliance, even if the unit owners’ financial obligations to the body corporate were met.[17]

The body corporate aligned its arguments and placed its faith on s 3(1)(p) of the Sectional Title Schemes Management Act (“the STSMA”), asserting that it had a duty to enforce legal requirements in other laws related to or connected with common property and its improvements. The relevant provision reads as follows:[18]

“A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include: to ensure compliance with any law relating to the common property or to any improvement of land comprised in the common property;”

Section 15B(3)(a)(i)(aa) of the Sectional Titles Act[19] (“the STA”), often referred to as the “embargo provision” provides that:[20]

“The registrar shall not register a transfer of a unit or of an undivided share therein, unless there is produced to him, a conveyancer’s certificate confirming that as at date of registration, if a body corporate is deemed to be established in terms of section 2(1) of the Sectional Titles Schemes Management Act, 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.” (my emphasis).

This is the provision that grants the body corporate significant say in the transfer of sectional title units and some commentators have said that it is the fabric of sectional title. It is also the basis upon which some restrictive conditions of title in title deeds of erf in homeowners associations are worded, and the rules of various community schemes, to protect the scheme from homeowners transferring their property without having settled their debts owing to the community scheme.

The court in Tapuch held that it was not the purpose of the embargo provision, to use the levy clearance certificate as leverage to enforce compliance with rules or any applicable law, and held further that it would render the express language of the provision completely useless.[21] To argue otherwise evidenced “a misconception of the body corporate’s responsibility and fiduciary obligations”.[22]

The court also pronounced that it is untenable for a body corporate, upon perceiving a particular rule or law to have been breached, to be a passive observer and bide its time, until the allegedly non-compliant unit owner decides to sell the unit.[23] Using the levy clearance certificate as a tool to strong-arm compliance at that juncture is not acceptable. A proactive approach is expected.[24]

The body corporate was ordered to immediately authorise the managing agent to issue an extended clearance certificate in respect of the owner’s unit, and the managing agent was ordered and compelled to immediately issue the extended clearance certificate in respect of the property and provide such clearance certificate to the applicant, or to the conveyancer attending to the transfer of the property, after it has obtained the first respondent’s authorisation.[25] The body corporate was also ordered to pay costs to the unit owner on the attorney-and-client scale.[26]

[1] Star Wars Databank, accessible at https://www.starwars.com/databank/obi-wan-kenobi.

[2] (29978/2022) [2022] ZAGPPHC 811 (24 October 2022).

[3] Tapuch para 15.

[4] Tapuch para 2.

[5] Tapuch para 2.

[6] Tapuch para 2.

[7] Tapuch para 8.

[8] Tapuch para 27.

[9] Tapuch para 3.

[10] Tapuch para 3.

[11] Tapuch paras 4, 5, 9 and 27.

[12] Tapuch para 6.

[13] Tapuch para 7.

[14] Tapuch para 7.

[15] Tapuch paras 6 and 7.

[16] Tapuch para 9.

[17] Tapuch para 14.

[18] Tapuch para 13.

[19] Act 95 of 1986.

[20] The Tapuch judgment incorrectly quotes, at para 10, the previous version of this provision, since replaced by the STSMA.

[21] Tapuch paras 22 and 23.

[22] Tapuch para 24.

[23] Tapuch paras 25 and 26.

[24] Tapuch para 26.

[25] Tapuch. See the order after para 30.

[26] Tapuch. See the order after para 30.