WHAT ARE LEVIES?
Sectional title owners are required to pay a monthly fee to cover costs involved in the running of the complex, which costs include inter alia: water; electricity and repair costs relating to the electrical installation in the common area; insurance replacement costs of buildings in the complex; managing agent fees; annual audit fees; and security and maintenance costs.
It is important to note that an owner’s share of the property rates are not covered by the levy, and are therefore an additional payment which the owner is liable to make. Levies are further only intended to maintain the common property of a sectional title development and as such they do not cover upkeep of the unit itself (for example owners are responsible for costs associated with the painting of the interior of their unit).
WHAT ARE “SPECIAL LEVIES”?
If there are insufficient finances available for upkeep and/or renovations of the sectional Title scheme, the Body Corporate may decide to charge a special levy. Special levies can be raised at the discretion of the trustees (trustees are elected by the Body Corporate at its first meeting and at every subsequent Annual General Meeting (AGM). Once the correct procedure has been followed and a special levy has been raised, owners of sections will be liable to make a further contribution which may be payable in monthly instalments.
Prescribed Management Rules (PMR) 31(4) of the Sectional Titles Act 95 of 1986 provide trustees with the power to impose special levies to cover unexpected expenses, provided that the following conditions are satisfied:
- the expense for which the special levy was raised was necessary; and
- the expense had not have been included in the budget approved by the owners at the last AGM.
HOW IS THE AMOUNT OF THE LEVY DETERMINED?
The Body Corporate approves general levies, which are based on the yearly budget and are effective for the upcoming financial year.
The Trustees will determine the entire yearly budget needed for the Complex’s operation and upkeep. The annual sum is lowered to a monthly budget, which must then be shared by all of the owners. The participation quota, also known as the levy owed by any one owner, is determined by dividing the floor area of the owner’s section by the sum of all the sections in the Complex (therefore an owner of a small unit within the scheme will pay a lower monthly levy than another owner who owns a larger unit).
CONSEQUENCES OF FAILING TO PAY LEVIES:
The majority of sectional title schemes suffer with defaulting owners in respect of levy payments. In this situation, the Body Corporates have two options:
- Lodge the matter with the Community Schemes Ombud Services (CSOS); or
- Institute legal action in a court.
Whilst the legal route is favoured by many Body Corporates, approaching the CSOS is also a viable option.
Generally civil courts can take a long time to process matters, with frequent adjournments and long waiting periods. Furthermore, proceeding the legal route incurs legal costs (although a percentage of such legal costs can be recovered from the losing party). If the defaulting owner refuses to comply with the court order, further procedure can be followed to have their movables and in extreme cases immovable assets attached and sold on auction to cover their debt. Essentially, movable property must always be attached and executed on first, and only where realised amounts do not satisfy the judgement debt will the unit itself then be executable.
In contrast to the above the CSOS procedure is generally faster and less costs are involved as there are no Attorney fees incurred in this process. Moreover, if the application is successful, the CSOS order carries the same weight as a judgment from the Magistrates’ Court.
The obligation to pay levies is not optional, should a member fail to meet such payment obligations and/or make payment arrangements with the Body Corporate, the Body Corporate could institute legal action against the defaulting member at CSOS or at court. In these circumstances, we recommend contacting one’s Attorney for further assistance in the process of levy collection.
Article by Thasmika Appadoo