In sectional tile schemes, levy arrears are more than an accounting nuisance — they directly threaten the financial viability of a scheme. Unit Owners often default on levy payments due to financial strain, broader economic conditions and limited understanding of their legislative obligations in terms of a sectional tile property.
When Unit Owners fall behind on their levies, the body corporate struggles to pay for essential operational expenses like security, utilities, repairs, insurance and municipal accounts. Levy defaults then often lead to increased contributions for compliant owners, the deterioration of common property, declining property values, significant legal costs for recovery, and in some cases, the disconnection of essential municipal services.
Understanding the cause and impact of the arrear levy crisis, stakeholders are continuously involved in initiatives aiming to stabilise the arrear levy collection environment.
These initiatives include:
- The STSM Advisory Committee’s stakeholder session earlier this year presented an opportunity to stakeholders to voice their concerns within the industry and the impact of the legislation.
- The Property Practitioners Regulatory Authority (PPRA) formalising the regulation of Managing Agents.
- The Community Schemes Ombud Service (CSOS) introducing the 2025 CSOS Consolidated Practice Directives, geared toward stronger enforcement of fines, penalties and possible criminal sanctions for non-compliant bodies corporate.
- Judiciary through the Johannesburg High Court launching a dedicated Insolvency Motion Court and a corresponding Insolvency Trial Court to fast-track sequestration, liquidation, and other insolvency matters, which previously languished on congested general motion rolls.
- Private sector involvement in the education of industry role players - Training Academy for Community Schemes (TRACS) providing free sectional title education to Unit Owners, Trustees and Managing Agents.
However, the question remains as to whether these reforms will finally ease the levy collection crisis in South Africa? In short, the answer is yes, but only partially.
- What could be resolved?
- Procedural clarity and stricter enforcement of compliance from CSOS, could mean fewer disputes over technicalities, quicker resolution of levy claims, and less scope for owners to delay payment.
- Fast-tracking sequestration, liquidation, and other insolvency matters provides a more efficient legal avenue to recover arrears from owners who are genuinely insolvent, reducing delays that previously hampered recovery.
- Offering of free sectional title education to unit owners, trustees, and managing agents, can improve awareness of levy payment obligations and the impact of defaulting on these payments, supporting proactive levy compliance and reducing arrears caused by misunderstanding or mismanagement.
- The remaining challenges:
- The dedicated Insolvency Court will be useful for large, single-owner defaults, but the majority of arrears are small to medium in size and spread across multiple owners.
- Even with streamlined procedures, property value and/or legal costs often outweigh the arrears owed, particularly for older or lower-value units.
- Capacity constraints within CSOS to execute directives effectively.
- Continuous financial and economic strain placed on Unit Owners.
Levy arrears remain a significant challenge for sectional title schemes, but recent reforms offer hope. Clearer CSOS procedures, a dedicated Insolvency Court, regulatory oversight by PPRA, and education programs like TRACS can improve enforcement, recovery, and awareness. However, widespread small-to-medium defaults, high recovery costs, and ongoing financial pressures mean the crisis won’t disappear overnight. Success will rely on industry stakeholders continuously working together to uphold their respective responsibilities and keep schemes financially healthy.
