A body corporate's trustees have authorised a managing agent to charge debt collection fees on owners' accounts. For example, the fee is billed as a 'receipting fee' calculated as a percentage of the levy due. Is this percentage-based fee structure legally compliant, and does the varying charge amount across units constitute unfair treatment?
ELA
EstateIQ Legislative Assistant
Your concern is well founded, and the practice you describe raises significant compliance and fairness issues under the Sectional Titles Schemes Management Act (STSMA), its Regulations, and the prescribed Management Rules (Annexure 1). Here is the breakdown:
1. Authority to Charge Owners
Under STSMA section 3(1)(f), a body corporate may only levy contributions (levies) "in proportion to the quotas of their respective sections." Any other charge must be authorised by the legislation or the prescribed rules.
Management Rule 25(1), Annexure 1 limits the types of lawful charges that may appear on owners' statements to:
- Contributions (levies) approved by the body corporate;
- Special contributions;
- Interest on overdue amounts; and
- "Reasonable charges" actually incurred by the body corporate in recovering arrear contributions (such as legal costs or collection commission).
➡️ Key Finding
A "receipting fee" or percentage-based charge applied automatically by a managing agent is not an authorised levy or charge under the Act unless:
- It represents an actual cost incurred by the body corporate; and
- The cost recovery method was approved by the body corporate in a properly adopted resolution that complies with the Act and Rules.
2. Who Bears Collection Costs
According to Management Rule 25(5), Annexure 1, collection and enforcement costs may be recovered from the defaulting owner, but only to the extent that the body corporate has actually incurred such costs in recovering arrears.
The rule does not allow the managing agent to impose a standing or percentage-based "fee" on owners' accounts. Only reasonable, evidenced recovery expenses (e.g., an attorney's letter or sheriff's fee) can be debited.
3. Fairness and Equality Requirement
STSMA section 10(3) requires that all rules must be reasonable and apply equally to all owners. A percentage fee that scales with levy size means that owners with higher levies pay more for the same administrative action.
⚠️ This is not equal treatment
This practice would likely be considered unreasonable and therefore invalid under the Act.
4. Fiduciary Duty of Trustees
Under STSMA section 8(2)(a), trustees must act "honestly and in good faith" and only in the interests of the body corporate. If trustees authorised a charge benefiting the managing agent without clear legislative authority or member approval, they may be acting outside their fiduciary duty.
5. Debt Collectors' Act
The Debt Collectors' Act, 1998 regulates persons who recover debts for reward. Even if the managing agent is registered as a debt collector, the STSMA still governs how and from whom charges can be recovered. Registration does not permit charges inconsistent with the scheme legislation.
✅ Summary of Legislative Position
| Issue | Legislative Basis | Implication |
|---|---|---|
| Percentage-based "receipting fee" | STSMA s 3(1)(f); Management Rule 25(1) | Not an authorised charge |
| Recovery of costs from owners | Management Rule 25(5) | Only actual, reasonable recovery costs allowed |
| Unequal treatment of owners | STSMA s 10(3) | Likely unreasonable and invalid |
| Trustee authorisation of such charge | STSMA s 8(2) | May breach fiduciary duty |
🟨 Recommended Action
You may:
- Request written confirmation from trustees of the authority under which the "receipting fee" is levied (specifically citing the relevant rule or Act clause).
- If unsatisfied, you may file an application with the Community Schemes Ombud Service (CSOS) for a determination under CSOSA section 39(1) (regarding financial management disputes and reasonableness of charges).
ELL
EstateIQ Legal Lookup
📘 Legislative References
Sectional Titles Schemes Management Act - Section 3(1)
A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include—
3(1)(f): to raise the amounts so determined by levying contributions on the owners in proportion to the quotas of their respective sections;
Sectional Titles Schemes Management Act - Section 8(2)
Without derogating from the generality of the expression fiduciary relationship, the provision of subsection (1) implies that a trustee—
8(2)(a): must in relation to the body corporate act honestly and in good faith, and in particular
(i) exercise his or her powers in terms of this Act in the interest and for the benefit of the body corporate; and
(ii) not act without or exceed those powers; and
Sectional Titles Schemes Management Act - Section 10(3)
The management or conduct rules contemplated in subsection (2) must be reasonable and apply equally to all owners of units.
Management Rules - Rule 25(1)
The body corporate must, as soon as possible but not later than 14 days after the approval of the budgets referred to in rule 17(6)(j)(iv) by a general meeting, give each member written notice of the contributions and charges due and payable by that member to the body corporate, which notice must—
25(1)(a): state that the member has an obligation to pay the specified contributions and charges; and
25(1)(b): specify the due date for each payment; and
25(1)(c): if applicable, state that interest at a rate specified in the notice will be payable on any overdue contributions and charges; and
25(1)(d): include details of the dispute resolution process that applies in respect of disputed contributions and charges.
Management Rules - Rule 25(5)
The body corporate must not debit a member's account with any amount that is not a contribution or a charge levied in terms of the Act or these rules without the member's consent or the authority of a judgment or order by a judge, adjudicator or arbitrator.