Sectional Title Levies

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Last week I dealt with some of the differences between Sectional Title and Freehold Title. This week we take a look at the issue of levies which are payable in respect of sectional title property.

As I mentioned previously, the financial affairs of a sectional title scheme are managed by the trustees appointed by the body corporate. In some sectional title schemes the individual owners do not pay rates direct to the municipality for their individual units. The rates which are payable to the municipality in respect of the scheme are paid over to the municipality by the body corporate. This is changing and in the future all sectional title units will be separately rated. The owners will then pay their own rates individually.

The body corporate collects monthly levies from the individual owners and must ensure that the levies are sufficient to cover the rates payable in respect of the scheme. The levies must also cover the following expenses: insurance premiums, maintenance and upkeep of the common property, audit fees and managing agents fees, service charges (water, sewerage etc) electricity charges in respect of the common property, lift maintenance and security charges.

The trustees, on behalf of the body corporate, determine the amount of the levy payable by each individual owner. Each year the trustees should do a budget for the scheme to determine the amount of the levy payable by each owner. They must of course ensure that the levies are sufficient to cover the expenses set out above.

The levy payable by each owner is determined by the participation quota applicable to the owner’s section. Simply stated this means that the size of the section determines the amount of the levy. The larger the section the higher the levy.

In addition to the monthly levy payable the trustees are entitled to raise special levies. For example if the exterior of the complex needs to be painted and there are insufficient funds in the “kitty” to cover the cost the trustees may raise a special levy to cover this cost.

Prospective purchasers of sectional title units should enquire about the amount of the levy payable in respect of the unit to ensure that they are able to afford the bond instalment and the monthly levy. They should also enquire whether any special levies are payable or whether the body corporate intends raising any special levies in the near future. If special levies are payable or likely to become payable in the near future the seller and the purchaser should reach agreement regarding who will be liable for the payment of such special levies. Their agreement in this regard should then be recorded in the deed of sale prior to the signature thereof.

(Disclaimer: This article is for information purposes only and do not constitute legal or other professional advice)