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Interest rate charged on arrear levy accounts
Hi,
What is the maximum interest %, annually, that a managing agent is allowed to charge a tenant? As I have a case where a tenant is being charged 10% per month on arrear leview, which is effectively 120% per year which is illegal per the NCA. Who governs these kinds of practices for the NCA and if this is illegal who do I report the matter to, the NCA I would assume??
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RE: Interest rate charged on arrear levy accounts
Follow.
RE: Interest rate charged on arrear levy accounts
Follow. I would like to see what other's say.
RE: RE: Interest rate charged on arrear levy accounts
Hi, Bertha. The MA is not allowed to charge interest; but the Trustees are, and may instruct the MA to do so. The STAct and Rules do not lay down any maximum interest rate. Is your tenant being charge interest on levy arrears? If so, this is in fact your responsibility as the section owner. I suggest you discuss the matter with the Trustees before taking any other action.
RE: Interest rate charged on arrear levy accounts
Hi
The trustees are only entitled to charge owners interest on arrear contributions. If it is a tenant whose rental it is in arrears it would depend on what the lease says and it would then be a matter between the landlord and his tenant – neither the trustees nor the MA should have anything to do with it.
If the tenant feels that he is being treated unfairly by his landlord he should approach the Rental Housing Tribunal.
RE: Interest rate charged on arrear levy accounts
A tenant is not liable to the BC either for levy payments or for interest charges on levies in arrears. So this is not the tenant's problem, but the unit owner's. The primary problem is also not the rate of interest charged - but the fact that the levies due have not been paid!!!
RE: Interest rate charged on arrear levy accounts
It is not clear why the Managing Agent is involved with tenants. The MA's mandate should be with Owners.
Interest rates, fines, on levy contributions etc should be defined at the AGM by the Owners.
Why should any MA get involved in Lease Agreements if Sectional Title Scheme Management is already a demanding career ?
RE: Interest rate charged on arrear levy accounts
Hi
The trustees are allowed to set the interest rate (PMR 31 (6)); it does not have to be determined at the AGM. Fines/penalties can only be imposed if proper provision is made in the rules of the scheme filed at the Deeds Office.
RE: RE: Interest rate charged on arrear levy accounts
Correct. There is no laid down maximum in terms of the Sectional Titles Act. However the trustees may not set and charge an interest rate that is excessive. If any owner wishes to challenge a way out rate, he may do so via a declaration of a dispute.
RE: RE: RE: Interest rate charged on arrear levy accounts
Follow
RE: Interest rate charged on arrear levy accounts
I have come across an arrangement where the tenant, in terms of the lease agreement, pays the contributions to the BC. If the BC (via the MA) accepts this arrangement - which I would advise against - this kind of enquiry might very well arise.
Question remins - if the interest charge for contributions in arrears which the trustees decide upon is, for instance, something in the order of 180% per annum, monthly calculated, would this be a contestible charge i t o the NCA?
RE: Interest rate charged on arrear levy accounts
Hi
Irrespective what the lease says i.t.o. he STA the registered owner remains liable for all monies due to the BC. As far as the NCA is concerned, as it does not apply to Sectional Title Schemes, it cannot be applied selectively as far as interest is concerned. If someone feels the interest rate is too high it would have to be challenged by other means than the NCA.
If trustees/MA accepts arrangements with non-owners for the payment of contributions they would be acting contrary to their fiduciary duties (it could also be called reckless)....Show More
RE: Interest rate charged on arrear levy accounts
Thanks guys for all your feedback. I would like to provide clarity on the matter and also ask for this in return. I am asking the question on behalf of a friend. This friend owns the said flat I speak of and the flat is paid up due to an inheritance he received thus he is the landlord. So what you guys are saying is that there is no maximum rental "law", for lack of a better word, which like the NCA prescribes the maximum interest on overdue levies?? Per the levy account, this interest is stated as "Penalties" and this penalties are on the legal fees incurred plus the arrear levies. He is currently paying the lawyer who instituted legal action on behalf of the MA as well as his arrear levies which is crippling as he was retrenched and now works on a contracct basis anything from 2 day to 5 days a week. Not an ideal situation. Hence I am trying to establish that he is perhaps being treated infairly and that the whole arrear levy interest and consequently the amount owing is incorrect. Do I thus consult the Body Corporate rules or the deeds document at the deeds office??
RE: RE: Interest rate charged on arrear levy accounts
The NCA does not extend to interest on levies, as this is not a debt instrument (even when in arrears). The act applicable is the STA. Your friend is liable for the contributions to the BC. If he has ceded those payment responsibilities to the tenant or estate agent managing the lease, and not covered the incedence of interest and penalties in the lease and ceding of the payment, he could be personally liable for those penalties and interest. That the body corporate is charging an unreasonable amount of interest, you should take this up with the trustees who are required to have made a decision on the maximum interest rate chargable. Trustee decisions are only valid if minuted. You will likely find this has not been done and as such they are not able to levy any interest, never mind the rates you mention.
RE: RE: RE: Interest rate charged on arrear levy accounts
Does anyone know if interest is taxable? If so, the BC may be at risk for charging such a high rate.
RE: RE: RE: RE: Interest rate charged on arrear levy accounts
Hi Julie
Yes, interest is taxable but it is the amount that is taxed, not the rate. At this stage the first R60 000 of interest income is tax free so it would be unlikely that a BC would have to pay tax on interest unless it had really massive arrears that it was charging, and getting, interest on.
So there is not much fear that a BC would have to pay tax.
RE: RE: RE: RE: RE: Interest rate charged on arrear levy accounts
Bodies Corporate are taxed on investment income ~ reference to interest received attracks attention from SARS. BC if 'properly' funded will always have income from interest and as mentioned by Rip the first R60k is exempt. Technicalities follows in calcs on the higher value.
RE: RE: RE: RE: Interest rate charged on arrear levy accounts
Thanks, guys for very useful info
RE: Interest rate charged on arrear levy accounts
Hi
It is the first R50k off all non-levy income, which is exempt from tax.
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