Who Pays the Special Levy? Understanding Liability Before Transfer

In community schemes, questions often arise about who must pay a special levy when a sectional title unit is sold. Is it the seller who was the owner when the levy was raised, or the purchaser who becomes the new owner when it’s due?

According to South African law, as clarified in Body Corporate of Sante Fe v Bassonia Four Zero Seven CC [2003] 4 All SA 310 (W) and reaffirmed in Willow Waters Homeowners Association v Koka N.O. and Another 2015 (5) SA 304 (SCA), the responsibility for a special levy generally lies with the person who was the registered owner at the time the valid trustee resolution to raise the levy was passed, not when payment becomes due.

Section 3(3) of the Sectional Titles Schemes Management Act 8 of 2011 confirms this principle by making it clear that liability attaches at the point the body corporate validly raises the levy, typically through a properly adopted trustee resolution. This is a critical distinction i.e., that the levy might be raised months before it becomes payable, and this time lag can lead to disputes if not clarified in the sale agreement or an addendum thereto.

Additionally, whether the levy is payable as a lump sum or in instalments may affect perceptions of liability. For example, if a special levy is raised prior to transfer but is payable in monthly instalments after the purchaser takes ownership, the purchaser may feel unfairly burdened, even though the legal obligation rests with the seller unless agreed otherwise.

To avoid conflict, sellers and purchasers should explicitly address the allocation of special levies in the deed of sale or an addendum. While the legal liability may rest with the seller (depending on timing), contractual terms can shift this burden, provided there is informed, mutual agreement.

Finally, where the full extent of a raised levy is not disclosed to a buyer, particularly in the case of large one-off sums, this may give rise to future claims, potentially even on the grounds of latent defect or non-disclosure.

Key takeaway: Don’t rely on assumptions and ask the tough questions when buying or selling. Special levies must be carefully considered during the sale process, with reference to when they were validly raised, how they are structured for payment, and whether liability has been contractually allocated between the parties.