Introduction
The body corporate needs to collect different contributions from different parties to ensure the scheme is well maintained and administered for the benefit of all owners. In this article I will set out the different types of contributions that the trustees are responsible for collecting on behalf of the body corporate as set out in section 3 of the Sectional Titles Schemes Management Act 8 of 2011 (the “STSM Act”).
Levies
It ids important to note that the term levies and contributions are used interchangeably in the legislation.
In terms of section 3(1)(a) of the STSM Act the body corporate must require the owners, whenever necessary, to make contributions to the administrative fund which is reasonably necessary or sufficient to cover the estimated annual operating costs for the:
- repair, maintenance, management and administration of the common property;
- 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;
- the payment of any insurance premiums relating to the building or land; and
- the discharge of any duty or fulfillment of any other obligation of the body corporate such as payment of the managing agent’s fees.
The body corporate must require the owners, whenever necessary, to make contributions to the reserve funds which is reasonably necessary or sufficient to cover the cost of future maintenance and repair of common property, in amounts not less than the amount prescribed by the Minister.
The owners are liable to pay these contribution amounts in proportion to their participation quota (“PQ”).
Reserve fund contributions
In terms of section 3(1)(b) of the STSM Act the 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 by the Minister. In terms of PMR 24(2) the reserve fund maintained must be used for the implementation of the maintenance, repair and replacement plan of the body corporate. In this way the reserve fund is connected to the compulsory ten-year maintenance, repair and replacement plan.
Exclusive use contributions
In terms of section 3(1)(c) of the STSM Act the 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.
Developer’s contributions
In terms section 3(1)(d) of the STSM Act the body corporate must require from the developer who is still entitled to extend the scheme to make reasonable additional contributions to the funds as may be necessary to defray the costs rates and taxes, insurance and maintenance in respect of any such part or parts of the common property affected by the development reservation, including the provision of electricity and water and other costs in respect of or attributable to that part of common property.
Special levies
Special levies are provided for in sections 3(2), (3) and (4) of the STSM Act. Special levies are raised by the trustees by passing a trustee resolution. The trustees are empowered to collect such levies when an expense arises that is necessary, but was unforeseen and not approved in the annual budget approved in the AGM. Special levies are therefore ad hoc emergency contributions collected in circumstances when the expense cannot be delayed until inclusion in the next approved budget. Such a levy may be recovered from all persons who are owners of sections at the time when the trustees passed the resolution. On change of ownership of a unit, the successor in title becomes liable for the prop rata payment of such contribution from the date of change of ownership.
Interest on levies
In terms of the PMRs the body corporate may, on the authority of a written trustee resolution, charge interest on any overdue amounts payable by a member to the body corporate, but the interest rate must not exceed the maximum rate of interest payable per annum under the National Credit Act of 2005, compounded monthly in arrears.
WRITTEN BY DR CARRYN MELISSA DURHAM
