Can a Body Corporate be compelled to issue a clearance certificate?

By Khanyi Matshaya
19 January 2024


Embargo Provision in terms of s 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986

Buying a home on auction is often one of the best options for those who are looking for significantly discounted prices. These auctions are facilitated by the Sheriff of the High Court at the instance of a Financial Institution that is looking to recover monies outstanding from the current Bondholder.

A Sale in Execution differs from a normal sale of immovable property. The terms and conditions of the contract may require the new owner to take over the outstanding debt of rates and levies. For a Sectional Title Unit to be transferred into the name of a purchaser, the Body Corporate must issue a Clearance Certificate. All outstanding monies have to be settled before the property is transferred to the new owner.

In the matter between Body Corporate of Marsh Rose v Steinmuller and Others (149/2022) [2023] ZASCA 143 (2 November 2023) the Court considered the interpretation of s 15B(3)(a)(i)(aa) of the Sectional Titles Act, Act 95 of 1986 which provides for the embargo provision in the context of a Sale in Execution. The Embargo provision entitles a Body Corporate to refuse to issue a Clearance Certificate until all monies owed to it in respect of the property have been paid, or provision has been made to the satisfaction of the Body Corporate, for the payment thereof.

The Purchaser challenged the outstanding levies he had to pay to a Body Corporate, and the High Court granted an Order to Compel issue of a levy Clearance Certificate.  The Body Corporate appealed the decision, refusing to issue a levy Clearance Certificate, because there was a dispute about other amounts owed by the current owner, who was a Judgement Debtor.

The Purchaser provided security for the payment of these amounts pending the outcome of the appeal instituted by the Body Corporate. The High Court full bench ruled in favour of the Purchaser and ordered the Body Corporate to issue the Clearance Certificate.

The Body Corporate relied on the Embargo provision when the appeal was brought to the Supreme Court of Appeal. The appeal was upheld and the Court ordered that the application by the purchaser be dismissed. The Court held that a Body Corporate has a right to exercise the Embargo provision and refuse to issue a levy Clearance Certificate when monies owed to it, in respect of property, are not settled.

The Court found that the Purchaser’s right to compel transfer of property is only against the Sheriff who is authorised, for the purposes of transfer, to act as if he is the registered owner of the property. The Body Corporate is not the registered owner of the property and therefore the High Court erred when it granted the order in favour of the purchaser.

It is, therefore, within the right of a Body Corporate to refuse issue a Clearance Certificate when monies for levies are still outstanding, in properties bought in sale of execution. The new buyers should take cognisance of terms and conditions relating to extra amounts they may have to pay before buying such properties.

Authored by Ms Khanyi Matshaya, a candidate Attorney in the employment of RW Attorneys, with Ms Boney Cronje providing oversight.