We are often asked if a sectional title body corporate is entitled to charge compound interest on arrear levies and what effect, if any, does the National Credit Act have. Well the simple answer is yes it may and the NCA has no effect due to the provisions of the Sectional Titles Act.

The Sectional Titles Act provides that one of the [fundamental] functions of a body corporate is to establish a fund for the repair, upkeep, control, management and administration of the common property. This then requires owners or members to make contributions to such fund called levies.

The Act provides further that any contributions levied under these provisions shall be due and payable on the passing of a resolution by the trustees of the body corporate.

Non-payment of the contributions levied is dealt with in prescribed management rule [PMR] 31 (5) & (6):

"(5) An owner shall be liable for and pay all legal costs, including costs as between attorney and client, collection commission, expenses and charges incurred by the body corporate in obtaining the recovery of arrear levies, or any other arrear amounts due and owing by such owner to the body corporate, or in enforcing compliance with these rules, the conduct rules or the Act.

(6) The trustees shall be entitled to charge interest on arrear amounts at such rate as they may from time to time determine."

A recent court case upheld that a body corporate may indeed charge compound interest, if resolved by the trustees, and that the arrangement between the body corporate and the owner, due to the provisions of the Sectional Title Act, is not subject to the NCA.