Can a Body Corporate refuse to disclose financial records?

Sectional title schemes
If you live in an apartment building or residential complex, you probably live in a sectional title scheme. In South Africa, a sectional title scheme is a form of property ownership where individuals own specific sections (like apartments or townhouses) within a larger development, along with an undivided share of the common property, such as gardens, hallways or swimming pools. All owners in a scheme are members of the Body Corporate, but governance happens via the trustees, who are elected by the Body Corporate. The trustees are responsible for performing the functions of the Body Corporate. They collect levies, ensure repairs and maintenance are carried out, and resolve any disputes that arise. Their transparency is not just good governance, it is a legal requirement. Owners have a right to see financial records to ensure levies are properly managed and check for irregularities. But what happens when trustees require owners to request information according to the Promotion of Access to Information Act (PAIA)?

A recent case illustrates that PAIA is not the correct route when an owner already has a legal right to the information under the Sectional Titles Schemes Management Act (STSMA).

Background to the case

An owner in a sectional title scheme grew concerned about possible financial irregularities. They asked to see the Body Corporate’s bank statements and expenditure records. They suspected an irregular loan had been taken out and referred to concerns raised in the audit report. The trustees refused the request, referring the enquiry to the formal process under PAIA. The owner refused to do this and instead consulted the Community Schemes Ombud Service (CSOS). The Ombud agreed the information had to be provided in terms of the STSMA. The trustees then took the matter to the High Court in an effort to overturn the CSOS decision.

The judgment

The Gauteng High Court dismissed the Body Corporate’s application and upheld the CSOS ruling. It made the following key findings:

PAIA does not apply where another legal right to information already exists. PAIA is meant for people who would not otherwise have a right to the information they seek. Where a statute like the STSMA already grants a right of access, PAIA is unnecessary. The court explained that using PAIA in these cases would be unnecessary and counterproductive. It would delay access and create confusion where clear rights already exist.

Owners have a legal right to financial records under Management Rule 26(2) in Annexure 1 to the Sectional Titles Schemes Management Regulations, which allows owners to inspect and copy the body corporate’s financial records on written application. This includes bank statements and statements of income and expenditure. A formal court application is not required. The request must be made in writing and must state what documents are sought. The request must also relate to assessing the financial status of the Body Corporate.

 

The court noted that, while owners have the right to access records, the trustees may redact some personal information. However, they must do so in good faith and only where the information is irrelevant to the financial position of the scheme. Not all personal details may be redacted. Information such as the names of owners and their levy payments may be necessary for the person requesting the records to properly assess the scheme’s finances.

The trustees tried to argue that the CSOS had no power to order them to provide records. The court rejected this argument. The STSMA and the CSOS Act clearly allow the Ombud to enforce compliance with the law.

Because the Body Corporate wrongly relied on PAIA to block access and its actions were directly contrary to its duties under the STSMA, the court ordered it to pay legal costs.

Key takeaways for owners and trustees

What lessons can be learned from this case for both owners and trustees in a sectional title scheme? Owners have a legal right to inspect financial records under the STSMA. Trustees may not block access by requiring a PAIA request. Requests must be made in writing and relate to financial transparency. Trustees can only redact personal information that is clearly irrelevant. The CSOS can issue binding orders to enforce access.

This case reaffirms owners’ entitlement to records under the STSMA and makes it clear that PAIA cannot be used to stall owners’ access to information. Trustees cannot put up unnecessary obstacles to deter owners from obtaining financial information they are legally entitled to. Refusing access to records without legal grounds may result in a CSOS order and a court ruling with legal costs against the Body Corporate.

For further information

If you are a trustee facing a request for access, or an owner whose request has been denied, SD Law can answer your questions and help you resolve the matter swiftly and lawfully. Contact one of our attorneys on 086 099 5146 or simon@sdlaw.co.za. Simon Dippenaar & Associates, Inc. is a law firm of specialist property lawyers in Cape Town, Johannesburg and Durban with extensive experience in sectional title law.

Further reading:

• Demystifying maintenance in sectional title schemes
• For The Record – Financial Management, Insurance & Levies

SD Law – Simon Dippenaar & Associates Inc.

Attorneys, Notaries & Conveyancers

SD Law is a Cape Town law firm with a strong practice in divorce and family law, urgent eviction matters, antenuptial contracts, liquor licence applications and selected commercial disputes. Clients instruct us when the matter is urgent, high-stakes or strategically sensitive, and when they want direct, clear legal advice backed by practical litigation experience.

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