Arbitration in sectional title cases – Property 24

 

The new legislation ensuring the resolution of disputes in sectional title schemes cases has been welcomed by the property sector.

The new legislation will ensure sectional title schemes, the body corporates of which are so often embroiled in lengthy legal proceedings with their members to resort to arbitration via a national ombudsman with regional ombudsmen in all provinces, says Tony Clarke, managing director of the Rawson Property Group.

The new legislation will ensure sectional title schemes, the body corporates of which are so often embroiled in lengthy legal proceedings with their members resort to arbitration via a national ombudsman with regional ombudsmen in all provinces, says Tony Clarke, managing director of the Rawson Property Group.

“The resolution of disputes in sectional title cases has too often taken a long time and can be very costly.

“Furthermore, by the time a court ruling is obtained, the defendant is quite often simply unable to pay.”

Clarke says arbitration of the type for which legislation is now provided does have the potential to speed up these matters and to keep costs down.

All in the property sector are, therefore, waiting to see just how effectively the new ombudsman system will be applied, he says.

Bearing in mind that the people selected for these important posts will need extensive property law expertise, it has to be recognised that it will be difficult to find sufficiently qualified people able to handle these arbitration processes, says Clarke.

He points out that a recent court case (Body Corporate of the Pinewood Park Scheme no. 202 vs. Delles (Pty) Ltd) has shown that there may be cases where arbitration cannot be resorted to.

In this case, the body corporate summoned the defendant to court on account of unpaid levies.

The defendant argued that he was not obliged to pay the sums claimed because, in terms of the house rules governing the scheme, the levies had not conformed to the Sectional Title Act, and, he said, arbitration in such disputes was compulsory.

Picking up on this point, the KwaZulu-Natal High Court found in favour of the defendant and ruled that the matter should have been referred to arbitration.

An appeal against this decision by the body corporate resulted in the case ending up with the Supreme Court of Appeal.

The defendant claimed that Section 6 of the Arbitration Act lays it down that, if a party to an arbitration agreement takes legal action on a matter still under arbitration, the other party can apply to the court to stop this.

The Appeal Court ruled against this, saying that the body corporate’s Management Rules had not been prescribed by an act of parliament and therefore it could not be concluded that they took precedence over the Sectional Title Act.

The body corporate’s appeal was therefore upheld and the defendant was not permitted to get the matter referred to arbitration as he had hoped.

Commenting on the case, Clarke says that it appears to reinforce the sanctity of a parliamentary act over and above other “rules” even though the state now wherever possible does favour arbitration.

The lesson to be learned is that where a property dispute warrants court action, this will still be possible and arbitration is now ‘in’ but it will not be a universal panacea, he says.

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