Sectional Title and cutting of electricity

Cius

Cius

Honorary Master
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This is a tough one. I am a trustee of a complex that has a rule within our legally binding and registered Body Corporate rules that states:

23.1. Levies and all other dues (including, but not limited to Standard Levy, Special Levy, electricity, interest and any and all other charges as may be levied by the Trustees and/or any Resolution from time to time) remain payable in advance, before the 1st day of the month in which they fall due.
23.2. Should the moneys be transferred from a bank other than Absa Bank Limited - the Transfer
is to be affected in good time, in order for the amount to show on the incoming bank statement by
no later than the 7th of the said month.
23.3. The Trustees may, at their own discretion - disconnect (or instruct for same to be done) the electricity to any unit in the complex where the levy and/or any other dues referred to in 23.1 remain unpaid by the 8th of the month.
23.4. Owners who have tenants in their units, will not be excluded from the disconnection of electricity should he/she have paid their dues owing to the Body Corporate.
23.5. The electricity mentioned in 23.3 will not be reconnected prior to payment, in full, of all outstanding dues, interest and dis/reconnection costs by the debtor.

So basically if people do not pay we cut their electricity a couple weeks later. We have a system of warnings, final warnings, cut notices etc. The problem is that as I understand it this is walking a thin line legally. Depending on who I chat too I hear cutting electricity is actually illegal and we may be sued. That worries me. So far it has worked fine and it has resulted in us having one of the best payment rates from our residents but I am worried as we have hit a new snag. Landlords who rent out their unit in the complex are starting to use this rule to enforce their tenants paying rent. One unit has been doing this for a while where he stops paying the levy if the tenant skips rent that month and we end up cutting their power for months at a time until they catch up. Now we have others asking us to do the same to their tenants.

My concern is that I don't want to be someone else's enforcer. The landlord wanted to take the risk of renting out the unit then he should deal with the crap and the legal hassle, not us. If a tenant sues the body corporate and this is not above board then the complex could take a serious financial loss due to legal fees, penalties, etc. Does anyone know anything about this? Looking for any relevant info. Personally I am of the opinion that we should keep the rules but exclude tenants from having power cut. The original purpose of the rule was to hit delinquent payers where it hurts (and boy does that work well) but in the case of a landlord-tenant relationship its the landlord that has to pay you and his tenant who suffers if the landlord is not paying.

As I see it a tenant not paying a landlord is a completely separate issue to the landlord not paying us. It is not acceptable in my eye's for the landlord to make his problem ours and we expect payment in full from a landlord independently of what his tenant is or is not doing. Am I right here?

IF we allow this trend to continue then I forsee landlords not caring if they get good or bad tenants as we will be their get out of jail free card. It would in the long run lower the quality of the entire complex if more and more people choose to rent out units to worse and worse tenants. It would also increase the ration of tenants/owners which any complex trustee could tell you is a bad idea in the long term. Owners tend to cause a lot less hassle than tenants as they are in it for the long haul and care more about their relationship with the BC.
 
Never mind. Found the answer here for those that are interested:
http://www.sectionaltitlesa.co.za/2...lectricity-or-not-to-cut-off-the-electricity/

Full court proceedings here:
http://www.saflii.org/za/cases/ZAGPHC/1998/1.html

I looked for this same answer back in 2010 and found nothing but in the last 2 years its basically been emphatically decided through a few more court cases and the publishing of a few more articles on it. It is illegal for Body Corporates to cut power. Only and electricity provider like a municipality can legally do it. A Body Corp would be lining themselves up for a court case if they tried. I'm kinda surprised that it has not happened to us already. The dude we keep cutting obviously has no google-fu. Still, speaking to our managing agents it seems many many complexes still do cut power and in 99% of the cases there is no court case as if the resident cannot pay electricity they certainly can't afford the legal fees required to go to court.
 
Cius said:
Never mind. Found the answer here for those that are interested:
http://www.sectionaltitlesa.co.za/2...lectricity-or-not-to-cut-off-the-electricity/

Full court proceedings here:
http://www.saflii.org/za/cases/ZAGPHC/1998/1.html

I looked for this same answer back in 2010 and found nothing but in the last 2 years its basically been emphatically decided through a few more court cases and the publishing of a few more articles on it. It is illegal for Body Corporates to cut power. Only and electricity provider like a municipality can legally do it. A Body Corp would be lining themselves up for a court case if they tried. I'm kinda surprised that it has not happened to us already. The dude we keep cutting obviously has no google-fu. Still, speaking to our managing agents it seems many many complexes still do cut power and in 99% of the cases there is no court case as if the resident cannot pay electricity they certainly can't afford the legal fees required to go to court.
Click to expand...

Your best bet would be to amend the rules, include a R500 penalty for late payments, and interest on the outstanding amounts.

That way if you have tenants that skip payment the owner gets nailed with a R500 fine. A few months of this and he will get rid of said tenants.

If a unit in a sectional title is sold all outstanding levies are paid to the body corporate as part of the sale, so they cannot dodge the penalties, eventually they will have to pay. Compound interest on outstanding penalties can really hurt :D
 
I too am a trustee of a BC and previous chairman. We too use this method as it is the only way of avoiding our ST complex being in the RED financially like 75% of all ST complexes.

We had legal opinion on this matter and an advocate gave us a interpretation that if the arrears is for electrical then you could legally disconnect that service and that the electricity supply act only applies upto our municipal meter. All wiring on our side of the meter is private.

We thus apportion arrears payments to all other services before electricity account, thus ensuring that any arrears always applies to the electricity account and any deprivation of service is directly attributable to non compliance by the aggrieved party

Also I dont think its your place to involve yourself between tenant and landlord. We issue all accounts to the landlord. The landlord is responsible as a member of the BC and his contract with his tenant should also make provision for him to provide a statement of dues to the tenant.

The tenant has no relationship legally (contractually) with the BC.

This also simplifies collections etc where previously a landlord wanted split bills with him paying the levy and the tenant the utilities.

Our collections have far fewer disputes and incorrect allocations as a result.

Also surely an owner as a member of the BC has the right to request that you terminate the electrical supply to his unit for "maintenance" etc? any issue arising therefrom would contractually be between the owner and his tenant?
 
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We recently looked into the whole to cut electricity or not to cut....

YOU are not allowed to cut the electricity supply. Instead you have to call Eskom or whoever does the power in you area and they have to go cut it. If you disconnect a tenant or owner's electricity it can bring the group of trustees and the managing agent quite a bit of serious hot water..

Same goes for the person sitting in the dark... They need to contact the Electricity people after their bill is paid to get it connected. Obviously there will be connect/disconnect fees.
 
I wonder what the position is if one simply limits the power supplied instead of cutting it completely. Give the defaulting unit enough power to run the bare essentials and nothing else.
 
any electrical wiring and/or instrument concerning the electrical department, on or off your property belongs to the municipality. as an adult you should know this. it is not difficult at all. you may NOT tamper with any of these parts belonging to the municipality should you do so you are at risk of facing serious charges against you. you may NOT use this as a bargaining tool against someone who doesn't pay their levies. you need to find another way to deal with the defaulters.
 
Raumas said:
I wonder what the position is if one simply limits the power supplied instead of cutting it completely. Give the defaulting unit enough power to run the bare essentials and nothing else.
Click to expand...

I would also like to know if this is an option
 
Gordon_R said:
No, and no! It is unlawful and technically impractical to limit the currrent flowing through a electric circuit.
Click to expand...

I think you're mistaken there. A complex I used to live in limited the supply to defaulters. It provides enough power to boil a kettle, but not much else. Legal advice was sought on this issue prior to implementation. The electrical infrastructure within the complex boundary in this case was the property of the complex.
 
why bother cutting the electricity?

all amounts owed by an owner is effectively "secured" credit, meaning that the BC will always get its money unless they owner is in serious financial difficulty (and owes other "secured" debtors too)

moreover we charge 15% interest on outstanding debt at present, and the BC through court proceedings can liquidate the unit to settle outstanding debt
 
saturnz said:
why bother cutting the electricity?

all amounts owed by an owner is effectively "secured" credit, meaning that the BC will always get its money unless they owner is in serious financial difficulty (and owes other "secured" debtors too)

moreover we charge 15% interest on outstanding debt at present, and the BC through court proceedings can liquidate the unit to settle outstanding debt
Click to expand...

A cash flow impact though...
 
Wow, old resurrect.

So I have some more info on this now. It is definitely illegal and you can get easily sued if you do this. It is a legal act of "Spoilation" and there are multiple court cases that have been lost by BC's when the resident takes them to court. So as usual the law protects the non payer (who is in breach) far more than the BC who is just trying to keep everyone's lights on. That being said it is still fairly common practice to do it as most people do not have the money for a lawyer and the court process if they can't pay their levy.

Hence my advice, if you have the risk appetite, go for it. The only person I would not do it to is a "rich bastid". This type of resident is someone who clearly has money but due to the fact that they are just a raging bastid they choose not to pay. I know of at least one complex where such a person resided. Refused to pay, when they threatened to cut he sent a lawyers letter informing them he would take them to the cleaners if they did any such thing. He also knew the legal loopholes like a master and somehow could always delay the whole legal credit process of attaching assets indefinitely.

What they discovered is there are a few things you can legally do. First and foremost you can limit the power to 10 amps. Its easy to do as it requires changing their switch on the common property to being just a 10 amp switch. You can have lights, but certainly not how water for 10 amps. The cost of the electrician to do and undo that change also goes to the unit in question and can be 2K each way so its actually often better for them to just accept a cut rather than a throttle. If they illegally change the switch back you just get an electrician back to undo, hide where there switch is if possible, and then find ways to deny any electrician access for them. Easier if you have security guards obviously.

The second thing you can do is if they are not paying levies all services that the complex provides needs to immediately stop. So no garden service, no maintenance, and you remove their number for the intercom. You are not allowed to legally deny them entry so they can keep their remotes but each and every time a visitor arrives the guards don't have to grant access. The resident has to walk/drive down to the gate to give access. If they live some distance from the gate this can work effectively.

Obviously you also want to get a lawyer with serious teeth working on the debt collection side of things. Eventually they realize its not worth it to not pay and they start. Better yet they move out.

Anyways, we have a 72 unit complex with a zero % default rate which is highly unusual in SA. The trick is you can't be soft. People always pay the softest creditor last. Hence you need to be the hardest creditor and they pay you first. Don't be unreasonable, especially if they approach you ahead of the default and propose a reasonable payment plan, but the second they breach that you throw the book at them. That is when they pay you first and the Edgar's account last instead of the other way round. It sounds harsh but considering the shared risk nature of ST its actually fair. It is not fair for all the paying residents to have their financial assets put at risk because of those that can't pay. If it gets out of control and fewer and fewer residents pay you eventually have to cut off security services and basic maintenance and that is a death spiral for a complex. So don't let it even get started. Solve problems fast!

Last word of advice, don't get used if you are cutting power. We had a guy with a non paying tenant in his unit. Each time the tenant would not pay he would not pay us. This would mean we cut the power to the tenant, who then paid the landlord who would pay us. The problem was he was using us to take on the legal risk to manage a problem that had little to do with us. Eventually we told him we would no longer cut power for his particular unit and he had to manage the situation on another way as it meant we carried all the risk. He chose to sell which effectively evicted the tenant and we got a better paying owner as a result too.
 
Cius said:
Wow, old resurrect.

So I have some more info on this now. It is definitely illegal and you can get easily sued if you do this. It is a legal act of "Spoilation" and there are multiple court cases that have been lost by BC's when the resident takes them to court. So as usual the law protects the non payer (who is in breach) far more than the BC who is just trying to keep everyone's lights on. That being said it is still fairly common practice to do it as most people do not have the money for a lawyer and the court process if they can't pay their levy.

Hence my advice, if you have the risk appetite, go for it. The only person I would not do it to is a "rich bastid". This type of resident is someone who clearly has money but due to the fact that they are just a raging bastid they choose not to pay. I know of at least one complex where such a person resided. Refused to pay, when they threatened to cut he sent a lawyers letter informing them he would take them to the cleaners if they did any such thing. He also knew the legal loopholes like a master and somehow could always delay the whole legal credit process of attaching assets indefinitely.

What they discovered is there are a few things you can legally do. First and foremost you can limit the power to 10 amps. Its easy to do as it requires changing their switch on the common property to being just a 10 amp switch. You can have lights, but certainly not how water for 10 amps. The cost of the electrician to do and undo that change also goes to the unit in question and can be 2K each way so its actually often better for them to just accept a cut rather than a throttle. If they illegally change the switch back you just get an electrician back to undo, hide where there switch is if possible, and then find ways to deny any electrician access for them. Easier if you have security guards obviously.

The second thing you can do is if they are not paying levies all services that the complex provides needs to immediately stop. So no garden service, no maintenance, and you remove their number for the intercom. You are not allowed to legally deny them entry so they can keep their remotes but each and every time a visitor arrives the guards don't have to grant access. The resident has to walk/drive down to the gate to give access. If they live some distance from the gate this can work effectively.

Obviously you also want to get a lawyer with serious teeth working on the debt collection side of things. Eventually they realize its not worth it to not pay and they start. Better yet they move out.

Anyways, we have a 72 unit complex with a zero % default rate which is highly unusual in SA. The trick is you can't be soft. People always pay the softest creditor last. Hence you need to be the hardest creditor and they pay you first. Don't be unreasonable, especially if they approach you ahead of the default and propose a reasonable payment plan, but the second they breach that you throw the book at them. That is when they pay you first and the Edgar's account last instead of the other way round. It sounds harsh but considering the shared risk nature of ST its actually fair. It is not fair for all the paying residents to have their financial assets put at risk because of those that can't pay. If it gets out of control and fewer and fewer residents pay you eventually have to cut off security services and basic maintenance and that is a death spiral for a complex. So don't let it even get started. Solve problems fast!

Last word of advice, don't get used if you are cutting power. We had a guy with a non paying tenant in his unit. Each time the tenant would not pay he would not pay us. This would mean we cut the power to the tenant, who then paid the landlord who would pay us. The problem was he was using us to take on the legal risk to manage a problem that had little to do with us. Eventually we told him we would no longer cut power for his particular unit and he had to manage the situation on another way as it meant we carried all the risk. He chose to sell which effectively evicted the tenant and we got a better paying owner as a result too.
Click to expand...

Wow, in the one complex we were renting a unit, every month they'd cut our power, seems the rental agency wasn't forwarding the money to the BC. I moved out there quickly, though when I owned a unit in a complex we had one guy who'd rack up bills of 60 to 70k a year on levies and fines and not bother paying. His services were cut and he'd still have the cheek to ask why his lawn wasn't cut or his unit sprayed for ticks,ants and termites or the geyser replaced when it burst.
 
supersunbird said:
A cash flow impact though...
Click to expand...

I can't see how defaulting on electricity will have a significant impact of BC finances, if it does then it speaks to the poor management of BC finances, which would then be a more important issue to address than cutting of electricity
 
BC should either have separate meters with direct accounts or force the building to go prepaid. Why have electricity as a headache for the bc? We had separate meters for our units and a common meter for common property that was covered by levies.
 
Kosmik said:
BC should either have separate meters with direct accounts or force the building to go prepaid. Why have electricity as a headache for the bc? We had separate meters for our units and a common meter for common property that was covered by levies.
Click to expand...

what happens is that the BC buys in bulk and then recovers the charge through the meters

I'm guessing thats the case here
 
saturnz said:
what happens is that the BC buys in bulk and then recovers the charge through the meters

I'm guessing thats the case here
Click to expand...

You mean they get billed in bulk and then divide by the readings on the meters. This is what used to happen in my old complex, I was always charged at the third tier rates because of this.
 
saturnz said:
what happens is that the BC buys in bulk and then recovers the charge through the meters

I'm guessing thats the case here
Click to expand...

That is exactly the case in a BC. Live and die by levies, special levies and electricity collections

I hope for those with units have joined in the discussion over property valuation changes at the municipalities. As the bulk costs of electricity is determined by the total value of properties
 
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