The Sectional Titles Act obliges the Trustees to establish a levy fund, budget realistically, and then collect monthly levy contributions from unit owners that will be enough to meet the expenses of the scheme. When I refer to expenses I don’t mean just the day-to-day costs of keeping the scheme on its feet but those expenses that the Body Corporate incurs on a monthly basis such as electricity and water payable to the City Council, staff salaries, UIF, PAYE, Managing Agents fees, plumbing and other maintenance costs. There are also costs incurred annually like audit fees and taxes that may be payable to SARS. Additionally it is critical that Bodies Corporate make provision for an adequate reserve fund – a savings account – for unexpected expenses.
A Body Corporate must be run like a business – gone are the days when the Trustees of certain buildings had a convivial get-together at The Spur on the last Thursday of every month and had a chat about what should and shouldn’t be done at the scheme.
Like the Directors of companies, elected Trustees are voted into positions of responsibility that require an enhanced degree of accountability. Trustees must fulfill their duties and powers properly or they can be held personally liable for loss suffered by their fellow members.
Special Levies (which are now referred to in the Act and the Prescribed Management Rules as ‘special contributions’) are different to normal levies. A ‘special contribution’ is any amount that the Trustees can ask unit owners to pay during the year for expenses that have not been included in the annual budget for some or other reason.
The Trustees have the authority to determine whether a special levy must be imposed, but in certain circumstances (and in their discretion) the Trustees may refer the decision to the members of the Body Corporate in a general meeting.
Depending on how urgently the funds are needed (e.g. to pay for the replacement of a burst pipe or to pay a painting Contractor over 10 months to paint the building), the Trustees can resolve that unit owners pay the special levy in one sum or over a number of months.
Generally special levies can be avoided if a Body Corporate is managed by the Trustees with the assistance of a professional Managing Agent like any business in a financially prudent and diligent manner in accordance with a realistic and forward-thinking budget that makes provision for unexpected eventualities.
Let’s face it, sometimes unexpected expenses are unavoidable, but these can largely be covered by making sufficient provision for a ‘rainy day’ – by building up an adequate reserve fund.
I INVITE QUESTIONS, WHICH I WILL ADDRESS IN THIS BLOG . . . if you do have sectional title questions that you would like answered please Email me at kbleijs@ibalaw.co.za and I will try to answer as many of your questions as I can
