Once an offer to purchase is signed and the transfer process begins, sellers of units in a sectional title scheme face several challenges, including the obligation to ensure that all dues to the body corporate are settled. This requirement, mandated by Section 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of  1986,  restricts the transfer of sectional titles unless a conveyancer's certificate confirms that all monies due to the body corporate have been paid or provisions satisfactory to the body corporate have been made. A conveyancer can however only issue the required certificate after receiving a body corporate’s assurance, in the form of a levy clearance certificate, that all amounts due to the body corporate have been paid or that provision for payment thereof has been made. 

This raises the question of whether a body corporate can in certain circumstances refuse to issue a levy clearance certificate and whether there are any limitations to such an entitlement. Over the years the courts have been approached to settle disputes where a body corporate refused to issue a levy clearance certificate and had the opportunity to provide some clarity on the matter.

In 2022 the Pretoria High Court was faced with a dispute where, despite the body corporate having been paid all monies due to it by the seller, the body corporate refused to issue an extended clearance certificate due to the seller having failed to submit building plans to the body corporate. In considering the dispute, the High Court emphasised that the wording of Section 15B(3)(a)(i)(aa) is clear and is aimed at ensuring the economic viability of a body corporate and is not intended to be used as a tool by a body corporate to ensure compliance with any rule or law.  The High Court ultimately held that in a situation where all monies due to a body corporate have been paid, a body corporate would be obligated to issue a levy clearance.  The court therefore ordered the body corporate to issue the extended levy clearance certificate.

In 2023, the Supreme Court of Appeal was faced with a dispute where a sectional title unit was purchased at a sale in execution and the purchaser refused to pay the body corporate all amounts it claimed to be due.  In this matter, the conditions of sale signed by the purchaser included a provision that required the purchaser to pay all amounts due to the body corporate. After receiving a breakdown of the amounts due to the body corporate, the purchaser refused to pay or make provision for the payment of the full amount due to the body corporate and tendered an amount less than the amount claimed by the body corporate.  The body corporate subsequently refused to issue the levy clearance certificate on the basis that the amounts tendered by the purchaser do not satisfy the requirements of the restriction introduced by section 15B(3)(a)(i)(aa). In its decision, the Supreme Court of Appeal highlighted that the restriction imposed by Section 15B(3)(a)(i)(aa) serves the purpose of assisting body corporates with recovering monies due to it by owners without having to resort to time-consuming and expensive litigation proceedings.   In addition to the above, the court noted that in instances where a body corporate is not paid the amounts due to it, or where provision is not made for the payment thereof, a body corporate would remain entitled to refuse to issue a levy clearance certificate.   

In conclusion, the issuance of a levy clearance certificate is a critical step in the transfer process of sectional title units, ensuring that all financial obligations to the body corporate are met. Section 15B(3)(a)(i)(aa) of the Sectional Titles Act mandates that this certificate must confirm that all dues are settled or provisions are made, serving as a safeguard for the financial health of body corporates. Recent court decisions highlight the importance of this provision, affirming that the certificate must be issued when all dues are paid, regardless of other compliance issues or disputes. The judicial emphasis on maintaining financial compliance underscores the need for sellers and purchasers alike to ensure full and prompt settlement of dues to facilitate a smooth transfer process and prevent unnecessary legal disputes.

The Property team at PH Attorneys are well-versed in the nuances of the Sectional Titles Act and the legal requirements surrounding transfers. Whether you're selling or purchasing a sectional title unit, we can guide you through every step of the process, ensuring that all obligations are met and your transaction proceeds smoothly. 

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