Why the National Credit Act Does Not Apply to Levies in South Africa

Property owners in sectional title schemes and homeowners’ associations (“HOAs”) in South Africa often raise questions about whether the National Credit Act, 34 of 2005 (“NCA”) applies to levies, especially when legal action is taken to recover unpaid amounts.

At Barter McKellar, we regularly assist clients with the recovery of levies and disputes relating to the collection of arrear contributions. In this article, we explain why levies do not fall under the scope of the NCA, and why bodies corporate and HOAs do not need to register as "credit providers" to enforce these payments.

What Is the National Credit Act (NCA)?

The National Credit Act, a.k.a. the NCA, regulates credit agreements in South Africa. Its primary purpose is to promote responsible lending, prevent reckless credit and protect consumers from exploitative credit practices.

Under section 8 of the NCA, the Act applies to certain types of agreements where credit is granted, such as:

• Credit facilities (e.g. credit cards, overdrafts)

• Credit transactions (e.g. loans, leases, instalment sales)

• Credit guarantees

A key requirement for an agreement to be subject to the NCA is that it must be a “credit agreement” where:

1. The creditor supplies goods or services or defers payment of an obligation; and

2. There is either an interest charge, fee or cost of credit imposed.

What Are Levies?

Levies are compulsory contributions imposed on property owners in:

• Sectional title schemes (by the body corporate); and

• Homeowners' Associations (HOAs), often structured as non-profit companies (NPCs).

Levies are used to cover shared expenses such as:

• Maintenance of common property

• Security

• Administrative costs

• Utility services

• Insurance

The obligation to pay levies arises automatically from:

• The Sectional Titles Schemes Management Act, 8 of 2011 (“STSMA”); and/or

• The Memorandum of Incorporation (MOI) and rules of the HOA or body corporate.

Importantly, levies are not a form of credit.

Why the NCA Does Not Apply to Levies

• No “Credit Agreement”

The payment of levies is not the result of a credit agreement. The owner’s liability to pay levies:

• arises automatically by law or by contractual membership in the HOA;

• is not the result of the HOA/body corporate supplying goods or services on credit;

• does not involve the HOA deferring payment as a form of "credit";

• does not involve a cost of credit being charged (interest is typically charged only as a penalty on arrears — not as compensation for deferred credit).

• No Business of Providing Credit

Section 4(1)(a)(ii) of the NCA states that the Act does not apply where the credit provider is not conducting business for the purpose of providing credit.

An HOA or body corporate (typically a non-profit company (NPC)) is established to manage the scheme — not to act as a credit provider.

• Case Law Supports This View

South African courts have repeatedly held that levies do not fall under the NCA:

The same legal principles apply to HOA levies, since the legal obligation stems from ownership and membership, not from any credit arrangement.

What This Means for Bodies Corporate and HOAs

• Bodies corporate and HOAs are not required to register as credit providers to collect levies.

• They are entitled to charge interest on overdue levies in terms of their MOI/rules or Prescribed Rate of Interest Act, without falling under the NCA.

• They can proceed with debt collection or legal action to recover arrears without triggering NCA compliance requirements (such as section 129 notices).

Conclusion

The NCA simply does not apply to levies. The obligation to pay levies arises ex lege (from the law) or contractually via HOA or sectional title rules, not through a credit transaction.

At Barter McKellar, we assist bodies corporate, HOAs and managing agents with:

• Recovering arrear levies;

• Defending NCA-based challenges; and

• Drafting clear levy policies and enforceable interest provisions.

If you need assistance with levy recovery or advice on structuring your HOA or body corporate policies, contact our team today.