Levy Contributions & Cash Flow Management in Community Schemes
Levy contributions are the lifeblood of a community scheme. Without them, a Body Corporate or Homeowners Association (HOA) cannot fund daily operations, pay service providers, or plan for future maintenance.
This article explains why levies are so important, the effect of non-payment, and strategies for maintaining healthy cash flow.
Why Levy Contributions Matter
Every owner in a sectional title scheme or HOA is required by law to contribute to the scheme’s operational costs. These costs include:
- Security, cleaning, and landscaping
- Insurance premiums
- Utility payments for shared services
- Management and administration fees
- Maintenance of common property
Levies ensure the scheme can meet its obligations without relying on reserves or raising emergency special levies, which can be financially stressful for owners.
The Impact of Non-Payment
When owners do not pay their levies:
- The scheme may fall behind on creditor payments
- Maintenance can be delayed, leading to higher repair costs
- The scheme’s financial health and reputation are damaged
- Other owners carry an unfair burden through higher future levies
Consistent levy collection is essential to avoid cash shortages.
Healthy Cash Flow Principles
A well-managed scheme:
- Prepares an annual budget with realistic levy targets
- Collects levies in advance to cover the coming month’s expenses
- Keeps a reserve fund for emergencies and long-term maintenance
- Reviews income and expenditure monthly to spot shortfalls early
Strategies to Improve Levy Collection
- Clear Communication – Provide owners with detailed levy statements showing how their contributions are used.
- Early Follow-Up – Send reminders as soon as payments are overdue.
- Legal Processes – Use the Community Schemes Ombud Service (CSOS) to recover arrears when necessary.
- Tenant Redirection Orders – If the owner is renting out their unit, CSOS can order the tenant to pay rent directly to the scheme until arrears are cleared.
Conclusion
Levy contributions are more than just a monthly payment – they are the foundation of a scheme’s financial stability. When levies are set at sustainable levels and collected consistently, the scheme can pay bills on time, maintain its assets, and preserve property values.
ANGOR Property Specialists assists Scheme Executives in setting realistic levy budgets, managing cash flow, and implementing effective arrears recovery processes.
Understanding Levy Collections in South African Community Schemes