Consumer Information

Author : Maryna Botha – STBB
12 February 2016

ONE OWNER’S LIABILITY FOR LEVIES INCREASED
EXTRA DIMENSIONS 121 (PTY) LTD V BODY CORPORATE OF MARINE (9015/2014) [2016] ZAKZDHC 1 (5 FEBRUARY 2016)

In sectional title developments, levies are raised according to the framework provided in the scheme’s Management Rules. The Sectional Titles Act provides mechanisms for the amendment of the rules, which is what occurred in this matter. The question raised was whether the affected owner whose levy liability increased as a result, could challenge the new rule on the basis that his rights were “adversely affected”, as section 32(4) of the Act provides that where an owner’s rights are adversely affected, his consent to the amendment must first be obtained.

SUMMARY OF JUDGMENT

FACTS
Extra Dimensions 121 (Pty) Ltd (Extra Dimensions) owned six commercial units in the Marine Sands sectional title scheme which it acquired in 2002. The scheme is partly residential and partly non-residential (commercial).

The participation quota for all the non-residential properties was determined by the developer of the scheme in terms of section 32(2) of the Sectional Titles Act, 1986 (STA) when application was made for the opening of the sectional title register. The participation quota of the non-commercial properties was then determined to constitute 6% of the whole, and the participation quota for each non-residential unit was determined by dividing the 6% allocated to the non-residential units between each non-residential section in proportion to their respective floor areas. At the time that Extra Dimensions acquired its property, its participation quota was 4.8409%.  

During 2011, it became apparent that the scheme’s managing agent was incorrectly charging the non-residential owners levies which were above that determined by the participation quota and Extra Dimensions paid a higher amount than it was required to. The issue was raised by the owners and subsequently Extra Dimensions’ monthly levy was reduced from R16 201.36 to R9 134.15.

In August 2012, the body corporate passed a special resolution whereby it was resolved to amend the determination of members’ contributions. The special resolution provided that, in terms of section 32(4) of the STA, the liability of owners to make contributions and the value attached to votes is modified according to percentages set out in an annexure. The annexure dealt with modification to contributions and reflects section numbers, floor area (square metres) and modification participation quota percentages. The modification had the effect that each owner was charged according to the ratio which the floor area of his section bore to the total floor area of all sections of the scheme, residential and nonresidential alike. This had the effect that Extra Dimensions’ levies increased from R9 134.15 to R19 878.17.

Extra Dimensions then approached the court for an order declaring the new body corporate rule to be invalid and of no force and effect.

Applicable law
Section 32(4) of the STA provides that a developer, “when submitting an application for the opening of a sectional title register, or the members of the body corporate may by special resolution, make rules under section 35 by which a different value is attached to the vote of the owner of any section, or the liability of the owner of any section to make contributions for the purposes of section 37(1 )(a) or 47(1) is modified: Provided that where an owner is adversely affected by such a decision of the body corporate, his written consent must be obtained”

The issue to be determined was the correct interpretation of the words ‘adversely affected’ in section 32(4) of the STA and whether Extra Dimension was adversely affected by the special resolution passed by the body corporate. If so, the resolution fell to be set aside, in accordance with section 34(2).  

HELD:
• The decision in Natal Joint Municipal Pension Fund v Endumeni Municipality is currently accepted to be the correct approach to the interpretation of words used in a document. It requires a particular provision or provisions to be read “in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production … A sensible meaning is to be preferred to one that leads to insensible or un-business like results or undermines the apparent purpose of the document … An interpretation will not be given that leads to impractical, un-business like or oppressive consequences or that will stultify the broader operation of the legislation or contract under consideration.”

• In light of Endumeni, section 32(4) cannot be read to allow an owner to allege that his rights were “adversely affected” merely because he/she is required to pay an increased levy. Were it so, then it would have been difficult to envisage any occurrence where it is voted to change the basis upon which levies are calculated in a scheme.

• The philosophy underlying the STA is for owners of units to be treated fairly. This is reflected in section 32(4) in that the section recognises that when it comes to determination of levies, each scheme may be different. Therefore, in order to arrive at the meaning of the phrase ‘adversely affected’ within the meaning of section 32(4) of the STA, all facts and circumstances must be taken into account and not only the fact that a member has to pay more levies.

• The predecessor to the current section 32(4) was a similar section in the 1971 STA where, however, a unanimous resolution was required for a decision to change the basis of an owner’s levy liability. Practically the result was that there never would be an instance where such amendment could be made as the owner paying more would refuse his written consent more likely than not.

• When the new STA was passed, the legislature was aware of the problem that the provision made it difficult if not impossible for body corporates to change the basis upon which levies could be increased. Hence the new section 32(4) which no longer requires unanimous consent but only a special resolution. In addition, the legislature would not have intended for absurdity in the new STA by requiring that no change in an owner’s levy liability can be determined unless an owner consents.

• Although the result of the impugned resolution is that Extra Dimensions pays more money on a consideration of all relevant facts, it cannot be said that he is adversely affected since he now gets to pay for what he uses or benefits from. It is unfair that one owner benefits from the use and enjoyment of the common property at the expense of others.

• As such, in order to arrive at a sensible and businesslike meaning, taking into consideration the context of the phrase, it cannot be said that Extra Dimensions is adversely affected by the resolution.

CONCLUSION
 The application was accordingly dismissed with costs. 

The Judgmen be viewed here: