Many trustees assume that unpaid levies remain owed indefinitely, no matter how long an owner has been in arrears. In reality, levy debt can, in certain circumstances, expire under South African law, a reality that catches many bodies corporate off guard.
This blog explains what debt prescription is, whether it applies to levy debt, what bodies corporate need to be aware of, and how professional property managers can help.
What is Debt Prescription in South Africa?
Debt prescription is a legal principle set out in the Prescription Act, which allows a debt to be extinguished simply because too much time has passed without the creditor taking steps to recover it.
The idea behind prescription is to provide certainty. After a reasonable period of inaction from a creditor, a debtor should be able to know with confidence whether a debt is still enforceable. For most types of debt in South Africa, including levy arrears, this period is three years.
Prescription doesn't happen automatically the moment three years pass. It must be actively raised as a legal defence by the debtor, usually once the body corporate attempts to recover the debt.
Are Levy Debts Subject to Prescription?
Yes. Contrary to a common misconception, levy debts are not immune to prescription simply because they arise from a statutory obligation under the Sectional Titles Schemes Management Act.
The three-year period applies individually to each levy instalment, calculated from the date that specific instalment became due, not from the total accumulated arrears. This means a body corporate that allows arrears to build up for years without action isn't just facing a growing debt; it may be watching portions of that debt quietly expire in the background.
What Can Interrupt or Delay Prescription?
Fortunately, the law gives bodies corporate several ways to protect themselves.
Serving summons: Formally serving summons on a defaulting owner interrupts prescription and resets the three-year clock.
Obtaining a court judgment: Once a judgment is obtained, the debt is no longer subject to the three-year period and instead becomes enforceable for 30 years, giving the scheme far more security.
Acknowledgement of debt: Where an owner acknowledges the debt, verbally, in writing, or through a partial payment, prescription is interrupted and the period starts again.
Prescription may also be delayed where a debt is subject to ongoing arbitration. There's been legal debate over whether it's delayed where a defaulting owner sits on the body corporate's governing body, though recent case law has taken a narrower view, generally limiting this protection to trustees rather than owners as a whole.
What generally does not interrupt prescription is pursuing liquidation proceedings alone, without a direct legal claim for payment alongside it, a pitfall confirmed by South African case law.
What Bodies Corporate Should Be Aware Of
Passive debt management is risky: Simply waiting to see whether a defaulting owner eventually pays is one of the biggest risks a scheme can take.
Track arrears instalment by instalment: Because prescription applies per instalment rather than to the total balance, proper record-keeping is essential to understand which portions of a debt are approaching the three-year mark.
Act well before the three-year deadline: Waiting until arrears are close to three years old leaves little room for error, given the time it can take to properly serve summons.
Court judgments offer stronger protection: For significant arrears, pursuing a formal judgment offers substantially better long-term protection than an informal payment arrangement.
How Professional Property Managers Can Help
Managing levy arrears and prescription risk requires consistent monitoring, accurate record-keeping, and timely action, areas where professional property managers provide valuable support.
Property managers can assist by:
- Maintaining accurate, instalment-level records of arrears for each owner
- Flagging accounts approaching key prescription timeframes
- Issuing letters of demand and coordinating with attorneys where necessary
- Helping trustees obtain and document acknowledgements of debt or payment arrangements
- Advising on when legal action, such as summons or a court judgment, may be appropriate
As with all legal and financial matters, property managers provide guidance and support based on their experience, but the final decision on how to pursue arrear levies and any related legal action rests with the trustees as the governing body of the scheme.
Conclusion
Levy debt is not immune to South African debt prescription laws, and bodies corporate that manage arrears passively risk losing their legal right to recover money that is rightfully owed. Understanding how prescription works, and acting promptly and consistently to protect the scheme's position, is essential to safeguarding its financial health.
With the support of an experienced property manager, bodies corporate can stay on top of arrears, act within the necessary legal timeframes, and protect the scheme from unnecessary financial loss.
FAQs
Is it a must to pay levies?
Yes. Paying levies is a legal obligation for every owner in a sectional title scheme, regardless of whether they occupy the unit themselves or rent it out. Failure to pay can lead to formal recovery action, including legal proceedings.
What happens after 3 years of not paying debt?
In general terms, a debt that has not been paid, acknowledged, or pursued through legal action for three years may become prescribed, meaning the creditor could lose the legal right to recover it. This isn't automatic; the debtor must raise prescription as a defence, and the creditor may have taken steps that interrupt or delay this period.
Who must pay the CSOS levy?
The CSOS levy is payable by the body corporate, which typically recovers the contribution from owners through their monthly levies. The amount is generally based on the value of each unit, with lower-value units often exempt.
Can you be jailed for debt in South Africa?
No, South African law does not permit imprisonment simply for failing to pay a debt, including levy arrears. Non-payment of levies is addressed through civil recovery processes, such as demand letters, CSOS applications, or court proceedings, rather than criminal prosecution.
