Sectional titles have upsides but here are 6 things to know about levies to save you a few headaches

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If the reserve fund of a sectional
title scheme is well managed, a special levy is seldom necessary.
If the reserve fund of a sectional title scheme is well managed, a special levy is seldom necessary.
Adam Kaz/Getty

Security, beautiful amenities for your family to enjoy with others in the estate or complex and possibly not having to pay any transfer duty if you're buying off-plan.

These are some of the pros of purchasing a sectional title unit.

But it comes like a bolt from the blue when the body corporate gives owners extra charges over and above their regular monthly levies.

Levies, however are strictly laid down by law and trustees of a sectional title scheme can’t just ask for money out of the blue. Every cent spent must be accounted for and members are entitled to see the books.

“At the moment we are in a very different market to what it was five years ago. And, certainly, post-Covid, things are a little bit 'soft' in the market across all fields, including sectional title.

"One of the best things about sectional titles is you’re buying into a secure environment in which you get to know your neighbours and hopefully the complex you’ve bought into has the longevity to remain a sought-after complex that is well maintained," says Jo Ann Gray, a Joburg-based General Manager of Firzt, a Property Practitioners’ company.

“There is that perceived security and a beautiful environment where your kids can play and, if there is a pool in the complex, they can use the common areas and enjoy that lifestyle,” she says.

“Another positive is if you buy as a new buyer in a new development – and in lots of regions there are developers doing these smaller, more affordable developments that cater to first-time buyers – they are always VAT-inclusive transactions.

“The law in South Africa says a buyer either pays transfer duty or VAT to the Receiver of Revenue. When you’re buying brand-new through the developer, you’re getting the benefit of not having to pay a transfer duty cost to the receiver of revenue as it is usually vat inclusive,” she explains.

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“Another pro is that the prices you pay are quite well-determined by what the size of the unit is. So there is an average price range per complex where a two-bedroom, two-bathroom unit would be approx. 120sqm and goes for, say, R9 500 per square metre, just as an example.” 

Understanding the averages in any complex assists buyers when determining the price they wish to offer to purchase, says Jo Ann. Levies are another tricky detail that first-time owners need to get their heads around as they can get hot under the collar when they’re hit with extra charges by the body corporate.

Here, in a nutshell, are the common levies that can be charged.

1 NORMAL LEVIES FOR THE ADMINISTRATIVE FUND

The administrative levy is probably the most common and is used to finance the normal maintenance costs of a sectional title complex. Remember, if you buying a sectional title scheme, you don’t only buy your unit but also apart of the common property, like the garden, clubhouse or swimming pool.

It means all the unit owners own the common property, which is why everyone has to contribute towards the maintenance and management of the complex. The levies of all the sectional title scheme’s members are placed in a fund, called the administrative fund.

The body corporate must be transparent about what the money is used for and can’t just withdraw money for any reason.

If the levies are changed, it must be approved at the members’ annual general meeting (AGM).

The administrative fund levies are generally used for:

  • Repairs, maintenance and management of the common property.
  • Municipal charges, such as electricity, water and sanitation services like refuse removal.
  • Insurance premiums for the grounds or buildings.

2 LEVIES FOR A RESERVE FUND

The law prescribes that a separate fund must be established for potential future repairs and maintenance on the common property.

This fund is called the reserve fund. It’s like a nest egg to ensure there’s enough money should an essential repair be required or for major projects, like repainting the common property every 10 years, according to Kayley Leverton of legal firm Gillan & Veldhuizen Inc.

Any levies raised for the reserve fund must be approved by members at the AGM.

3 SPECIAL LEVIES REQUESTED BY THE TRUSTEES

These special contributions maybe charged only to cover urgent and essential expenditure. Special levies may not be levied for any expenses already covered in the budget approved at the previous AGM.

This means a special levy can’t be raised to cover maintenance.

It should be an unforeseen incident such as unexpected, major storm damage.

The reserve fund is intended to prevent special levies. So if the reserve is well managed, a special levy is seldom necessary.

4 EXCLUSIVE USE CONTRIBUTIONS

A levy is applicable in some parts of the common property if you have exclusive use of it, Leverton explains.

Examples of exclusive use areas are garages, parking bays and storerooms.

They are usually indicated on the sectional title scheme plan or in the rules of the sectional title scheme.

5 THE LEVY TO THE OMBUDSMAN OF SECTIONAL TITLE SCHEMES

This levy must be paid by law to the ombudsman or, as it’s known, the Community Schemes Ombud Services.

It’s charged according to a sliding scale.

For example, if your monthly levy is R600, your contribution will be R2 a month, and so forth.

The amount can increase to a maximum of R40 a month for members whose levies are above R2 500 a month.

Read more | Joburg or CT, complex rules, finances and levies – what to ask when eyeing a sectional title

However, there are exemptions, like when a unit’s monthly levy is below R500 and for members whose monthly household incomes after tax are below R5 500, Leverton says.

6 PENALTIES

This is when, for example, someone fails to pay their monthly levy.

The management committee of the sectional title scheme may then charge interest on the arrears.

If they have to take legal steps, the legal fees may also be claimed from the non-payer.

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