What Your Levy Pays For in a Sectional Title Scheme

Why this question comes up so often

Most owners in a sectional title scheme pay a levy every month without ever seeing a clear breakdown of where it goes. Then the levy goes up, or a special levy arrives, and the questions start.

This guide explains what a normal levy pays for, how it is set and how you can check the numbers for your own scheme. It is general information. Every scheme has its own budget, rules and needs.

How your levy is set

Under the Sectional Titles Schemes Management Act 8 of 2011, every body corporate must keep two funds: an administrative fund for day to day running costs and a reserve fund for future maintenance and repairs.

Each year the trustees prepare a budget for both funds. The owners consider and approve that budget at the annual general meeting. The total is then shared between the owners, usually according to each section’s participation quota, unless the scheme’s rules provide for a different split. In simple terms, a bigger section normally carries a bigger share.

So your levy is not a number the managing agent picks. It comes from a budget that the owners approve.

What the administrative fund pays for

Maintenance and repairs of common property

Common property is everything outside the sections themselves. That includes roofs, external walls, driveways, boundary walls, gates, stairwells, lighting in shared areas, pumps and plumbing that serve more than one unit. When something on the common property breaks, the body corporate pays to fix it. Routine work such as gutter cleaning and gate motor servicing also comes from here.

Building insurance

The body corporate must insure the buildings for their replacement value. That premium is one of the bigger items in most budgets, and it is paid from the levy.

It is worth being clear about what this does not cover. The scheme’s policy covers the buildings. It does not cover your furniture, appliances and personal belongings. Owners and tenants need their own household contents insurance for that.

Shared municipal services

In some schemes, water and electricity come in through a bulk meter and the body corporate pays the municipality for the whole complex. The costs are then either recovered through sub-meters or built into the levy. Water for gardens, common lights and pool pumps is usually a common cost either way.

Security, gardens and cleaning

Many schemes pay for guarding, an armed response contract, access control or electric fencing. Garden services, refuse areas and the cleaning of shared spaces are also common items.

Managing agent fees

If the scheme appoints a managing agent, the agent’s fee is part of the administrative budget. That fee covers work such as levy billing and collection, paying suppliers, keeping the books, arranging meetings, getting quotes and following up on maintenance for the trustees.

Audit, bank charges and administration

The body corporate’s financial statements must be audited each year. There are also bank charges, postage, legal costs when they arise and other small running costs.

The CSOS levy

The Community Schemes Ombud Service (CSOS) is the body that helps owners, occupiers and trustees resolve disputes in community schemes. It is funded partly by a levy charged on schemes. The body corporate pays this levy to CSOS, and it is recovered from owners as part of the monthly levy.

What the reserve fund is for

The reserve fund is money set aside for bigger work that does not happen every year. Think of re-roofing, waterproofing, repainting the whole complex, replacing gates or resurfacing driveways.

A healthy reserve fund means that when a big job is due, the money is already there. A weak reserve fund usually means a special levy, a loan or work that keeps getting postponed while the damage grows. The Act and its regulations require schemes to contribute to the reserve fund and to plan for future maintenance, so this part of your levy is not optional.

What about special levies?

Sometimes there is an expense the budget did not cover. A storm damages the roof, a major pipe bursts, or a legal matter needs urgent funding. In those cases the trustees can raise a special levy to cover that specific cost. It is a once-off charge on top of the normal levy, shared between owners in the same way.

A good reserve fund and a realistic budget make special levies less likely. They cannot rule them out completely.

How to check where your levy goes

You do not have to take anyone’s word for it. As an owner you are entitled to see how the money is used.

Here is what you can do:

• Ask for a copy of the approved budget for the current financial year.
• Ask for the latest audited financial statements.
• Read the AGM notice and minutes, where the budget and levy increase are discussed.
• Attend the AGM and ask questions about any line you do not understand.
• If you still have a concern, raise it in writing with the trustees or the managing agent.

Trustees, a short note to owners explaining the main budget lines before the AGM can save a lot of frustration later. Most owners are not against paying. They want to know what they are paying for.

Need help with your scheme’s levies?

Blue Dot Property has been a managing agent in Emalahleni since 2008. We work with trustees every day on budgets, levy collection, maintenance planning and reserve funds.

If you are a trustee or owner and want to talk through your scheme’s levy or budget, phone us on 013 001 1922 or send a WhatsApp to 081 274 5421. You can also find us at www.bluedotproperty.co.za.