Every now and then we get a call from a perturbed client who has just received a sizable penalty on his monthly levy account from his body corporate or homeowner’s association for failing to have started/completed (this can vary) the building of a house on their estate erf. The demand is to know whether this penalty is enforceable and fair.

When living in an estate, whether it be a sectional title scheme or homeowners’ association, a fact one must reconcile yourself with is that estates have rules and regulations that govern the functioning of the estate and are intended to provide a fair and regulated living environment for all. Levies are also payable which are applied to the functioning, operation, management and maintenance of the estate.

That said, estates cannot just make up their own rules on the fly, and rules for the estate must be included in the management rules of a body corporate or the constitution of a homeowners association. It is also in these ‘rules’ that the estate must provide for the imposition of penalties for an owner failing to build or complete their home (as the case may be) within a set period of time.

Quite often such penalties may be double, or even triple, the existing monthly levy payable by the owner and is usually recurring until the owner has satisfied the rule and has commenced or completed the building process (as is required by the rule).

Typically, the purpose of such penalties is not for financial gain, but to ensure that the members of the estate comply with the rules and procedures of the estate, which typically would want owners to build on their properties within a certain period of time so that the estate can be developed and members can enjoy the privileges of a fully developed estate. This avoids scenarios where properties lay undeveloped for years and construction is never finalized in the estate, affecting the overall enjoyment and aesthetic appeal of the estate. But, are penalties allowable to achieve such enforcement?

Our courts have had occasions to consider the imposition of such penalties, and even where such penalties, are two or three times the monthly levy, such penalties have been found to be justifiable as they were intended to penalize the failure to commence construction timeously and ensure compliance with the rules. If such penalties were not substantial enough, it would just lead to non-compliance as owners may feel they could ‘pay’ for the delay. Penalties that are substantial enough however would have the desired effect that members would rather comply than carry the cost of continuing penalties.

In conclusion, it can be confirmed that such penalties are allowable, provided they form part of the rules of the estate and are fair and reasonable in the light of the non-compliance they wish to curb. 

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