Club Kerkira (Pty) Limited v Trustees of Club Kerkira Body Corporate and Others ZAKZDHC 40 (4 June 2024)
The Kerkira sectional title scheme development was opened in 1992 on a large piece of land, some 44 hectares in extent. It was a phased development, the developer having registered a right to extend the scheme in future, in its name. Its aim was to erect a total of 101 units. The initial phase consisted of the erection of 16 homes, roads and certain infrastructure. For various reasons, development beyond the first phase did not proceed, saddling the 16 first-phase buyers, as body corporate, with the maintenance and administration obligations owed to the large common property. The developer refused to contribute towards the levies pertaining to the parts of the common property over which it held the right of future development, arguing that it was only liable to make good those maintenance expenses that the body corporate had actually incurred.
Section 3(1)(d) of the Sectional Titles Schemes Management Act 8 of 2016 (‘the STSMA’) reads as follows.
“Functions of Body Corporate
(1) A body corporate must perform the functions entrusted to it by or under this Act or Rules, and such functions include –
…
(d) to require from a developer who is entitled to extend the scheme in terms of a right reserved in s 25(1) of the Sectional Titles Act, to make such reasonable additional contribution to the funds as may be necessary to defray the costs of rates and taxes, insurance and maintenance of the part or parts of the common property affected by the reservation, including a contribution for the provision of electricity and water and other expenses and costs in respect of and attributable to the relevant part or parts.”
The developer argued that the words “to defray the costs” meant that only such costs as already incurred, was claimable from it by the body corporate. This argument the Durban High Court rejected. It explained that contributions payable by the holder of a right of extension are the subject of the ordinary budgeting process that a body corporate follows in respect of levies that are payable and claimable monthly, as the Kerkira body corporate had done. The developer’s contention that the body corporate was obliged first to prove that it had incurred the expenditures, carries with it the implication that a body corporate must incur liabilities at a time when the expenses are not covered by its purse – or, on the other hand, an implication that the levies raised against sectional title owners under section 3(1)(a) of the STSMA must include anticipated expenditures falling within section 3(1)(d) of the Act in the hope or expectation that such would be recovered from the holders of rights of extension. Such a proposition is not aligned to the purport of the STSMA and is inconsistent with the general scheme of section 3 that a scheme should not run on credit.
What section 3(1)(d) obliges a body corporate to do is to secure from holders of section 25 rights an additional contribution. Clearly what is contemplated is a contribution in addition to the ordinary levies payable under section 3(1)(a) by the owners of sectional title units, without the requirements to first incur expenditure.
The Court accordingly upheld the Kerkira body corporate’s claim.
