By Ané de Klerk
One of the biggest headaches of community scheme management has to be dealing with the collection of arrear levies. Recovering money from those who have fallen behind on their contributions due and payable can often seem like pulling hen’s teeth, and while some owners reply to a letter of demand with a humble apology and frantic eft-payment made the very next day, others prefer to put up a fight and often rely on prescription to get them off the hook. But what exactly is this “prescription” and what effect does it have on the community scheme’s right to claim the contributions legally raised to cover its costs and perform its functions?
Prescription refers to the role that the passage of time plays in the creation of, or bringing an end to, certain rights. In community schemes, owners who have failed and/or neglected to pay their contributions, can be absolved from their debts due and payable if enough time has passed for the scheme to effectively lose its right to lawfully collect such contributions. For guidance on how much time has to pass before these levied contributions prescribe, we turn to the Prescription Act, 68 of 1969 (“the Act”).
According to the Act, extinctive prescription will take place after 3 years have passed from the date on which the levied contributions became due if the debt has not been admitted by the member or legal action taken by the scheme’s management body to collect the overdue levies within those 3 years. In other words, if the levies are not recovered within 3 years of same becoming due, the community scheme will lose its claim against the member unless the prescription is interrupted by debtor acknowledgement or judicial action. If the member admits the debts and/or legal action is taken by the scheme’s management body, the 3 years start to run from day 1 again.
HOWEVER, according to the Act, if the levy becomes due, but:
- the creditor is a juristic person (as community schemes are), and
- the debtor is a member of the governing body of the community scheme (in other words an executive like a trustee of a body corporate or director of a non-profit company Homeowners Association), or
- the debt has become the object of a dispute in arbitration proceedings,
the prescription period runs as normal but the 3 year period is extended until 1 year after the situation ceases to exist (so 1 year after the member is no longer a trustee of the body corporate or director of the homeowners’ association or 1 year after the matter is no longer in arbitration).
If none of these exceptions to the general rule exist, the claim will prescribe after 3 years.
Should you require clarification on whether a claim for overdue levies in your scheme has prescribed or not, don’t hesitate to contact the writer at consulting@for a no-obligation quote to discuss the particulars of your matter.