Sectional Title Scheme Levies
Category Property Management
What can be included in levy statements in sectional title schemes?
Article by Dr Carryn Melissa Durham - Paddocks
Previously, I wrote a blog post titled "Must the trustees send levy statements to owners in sectional title schemes?" which dealt with whether this is a requirement and if so, what needs to be included in the levy statement. With the adoption of the Sectional Titles Schemes Management Act 8 of 2011 ("the STSMA") and the Community Schemes Ombud Service Act 9 of 2011 ("the CSOSA") there have been some changes to this position.
While the trustees (or managing agent) should still send monthly levy statements to each owner to ensure open and transparent governance, the items that should be included in the levy statement have changed. In my view, the levy statement should contain separate line items for each of the contributions that an owner may owe the body corporate.
The following constitutes a list of the possible contributions due by an owner to the body corporate that could be included in the levy statement:
1. Normal levies raised to fund the administrative fund
In terms of section 3(1)(a) of the STSMA a body corporate must establish and maintain an administrative fund, which is reasonably sufficient to cover the estimated annual operating costs for the repair, maintenance, and management of the common property (including reasonable provision for future maintenance and repairs); for the payment of rates and taxes and other local municipality charges for the supply of electricity, gas, water, fuel and sanitary or other services to the building or land; for the payment of any insurance premiums relating to the building or land; and for the discharge of any duty or fulfilment of any other obligation of the body corporate. In terms of section 3(1)(b) of the STSMA, a body corporate must require the owners, whenever necessary, to make contributions to such funds. The levies required to fund the administrative fund are raised at the annual general meeting ("AGM"), and are based on the approved budget. This is collected on the basis of each owner's participation quota.
2. Levies that are raised to fund the reserve fund
The requirement to establish and maintain a reserve fund is in addition to the requirement to establish and maintain an administrative fund. In terms of section 3(1)(b) of the STSMA a body corporate must establish and maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property, but not less than such amounts as may be prescribed. Regulation 2 of the Sectional Titles Schemes Management Regulations (the "STSMR") sets out the prescribed minimum amounts for the reserve fund. these amounts are the minimum amounts, and may not accurately reflect what is required in your scheme. Therefore, it is important for each scheme to comply with Prescribed Management Rule ("PMR") 22 of Annexure 1 of the STSMR, which provides that a body corporate must prepare a written maintenance, repair and replacement plan ("MR&R plan") for the common property. In terms of section 3(1)(b) of the STSMA a body corporate must require the owners, whenever necessary, to make contributions to such funds. Prescribed Management Rule ("PMR") 24(2) provides that the reserve fund must be used for the implementation of the written maintenance, repair and replacement plan ("MR&R plan") of the body corporate. These levies are raised at the annual general meeting ("AGM"), based on the approved budget and MR&R Plan, and collected on the basis of each owner's participation quota.
3. Special levies raised by the trustees
PMR 21(3)(a) gives the trustees the power, on the authority of a written trustee resolution, to levy members with a special levy if additional income is required to meet a necessary expense that cannot reasonably be delayed until provided for in the budget for the next financial year. These levies are therefore raised by the trustees for necessary and unbudgeted expenses as they arise.
4. Additional exclusive use contributions
In terms of section 3(1)(b) of the STSMA, a body corporate must require the owners of sections, (entitled to the right to the exclusive use of a part or parts of the common property, whether or not such right is registered or conferred by rules), to make such additional contribution to the funds as is estimated necessary to defray the costs of rates and taxes, insurance and maintenance in respect of any such part or parts, including the provision of electricity and water, unless in terms of the rules the owners concerned are responsible for such costs. These additional contributions are collected in terms of section 3(1)(c) of the STSMA, or in terms of the exclusive use rule.
5. The levy that needs to be paid to the Community Schemes Ombud Service
In terms of section 59 of the CSOSA every scheme must, each calendar year, at prescribed times, pay Community Schemes Ombud Service ("the CSOS") a levy as prescribed (subject to discounts and waivers). Regulation 2 Community Schemes Ombud Service ("CSOSR") states that schemes must collect a monthly levy from every unit. This levy is calculated based on the monthly levy charged by the scheme. The CSOS Fee Regulation 2 contains a table showing the levies payable. This levy is paid to the CSOS quarterly on or before 31 March 2017; 31 June 2017; 31 September 2017; and 31 December 2017.
6. A rental amount due to the body corporate for leasing part of the common property
In terms of section 3(1)(h) of the STSMA, the body corporate can, on the authority of a special resolution, let out portions of the common property to owners for periods that do not exceed 10 years. An example would include a parking bay.
The rental amount charged for letting that portion of the common property can be included on the levy statement.
7. Any penalties due in terms of a valid fining rule for contravention of the Acts or rules
It is important to note that the fine imposed can be set out in the levy statement, but may not be added to the contribution, which an owner is obliged to pay in terms of section 3(1)(a), (b) or (c) of the STSMA, and claimed by the trustees as part of the monthly installments payable by the owner. PMR 24(1) states that the purpose of the contributions to the administrative fund is to pay for the scheme's operating expenses for maintaining the common property. PMR 24(2) provides that the reserve fund must be used for the implementation of the MR&R plan. Therefore, the duty to contribute to the administrative or reserve fund cannot include the duty to make payment of fines.
Additional contributions collected in terms of section 3(1)(c) of the STSMA must be used for maintaining the exclusive use areas.
Article reference: Paddocks Press: January 2018
This article is published under the Creative Commons Attribution license.
Author: Dr Carryn Melissa Durham - Paddocks