Understanding Levies in Sectional Title Schemes

The Sectional Titles Schemes Management Act (STSMA) requires every body corporate to raise contributions from owners, commonly called levies, to fund the operation and long-term maintenance of the scheme. Levies are not a service charge levied by an outside company; they are your share of a small business you jointly own with the other owners.

Because levies are jointly owned expenditure, they behave differently to any other property cost you pay. They rise every year. They can be supplemented mid-year by a special levy. And they can be a strong indicator of how well or poorly the scheme is managed.

Levies are the largest recurring cost on a sectional title investment after the bond instalment. A poorly run scheme with weak reserves can double your effective monthly cost through a single special levy. A well-run scheme protects the value of the unit by keeping the building in good repair, badly maintained schemes sell at material discounts to well-run ones in the same street.

Under STSMA, the body corporate must prepare an annual budget covering the administrative fund (day-to-day operating expenses) and the reserve fund (long-term maintenance). Owners contribute to both, in proportion to their participation quota (PQ), which is set by the sectional plan and normally reflects the size of the section.

The administrative fund's size reflects the running cost of the scheme. The reserve fund's size reflects the scheme's discipline in provisioning for the future. The 10-year maintenance plan (mandatory under STSMA Regulation 2) is the yardstick.

Every scheme must prepare and maintain a written 10-year maintenance, repair and replacement plan, updated annually. The reserve fund contribution must move the reserve toward the levels the plan requires. Schemes with reserves below 25% of the annual admin fund contribution must contribute at least 15% of the total budget to reserves; schemes above 100% may reduce contributions.

A special levy is a one-off contribution raised by trustees for a specific purpose that the reserve fund cannot cover. Common triggers include urgent structural repairs, lift replacement, waterproofing failures, fire compliance upgrades, or shortfalls after an insurance claim.

Special levies can range from a few thousand rand per unit to hundreds of thousands. They are enforceable in the same way as normal levies, a defaulting owner faces interest, legal action and, ultimately, sale in execution.

1. Request the last three levy statements, two AGM minutes, latest financials, current reserve balance and the 10-year plan.
2. Confirm what percentage of owners are in arrears. Over 15% is a red flag.
3. Read the conduct and management rules registered with CSOS, not the marketing brochure.
4. Ask whether any special levies are pending, under discussion or recently paid.
5. Confirm the managing agent's fidelity fund cover and PPRA registration.

• Comparing schemes on levy amount alone. A low levy in a scheme with no reserve is more expensive than a higher levy in a well-provisioned one.
• Assuming trustees can raise the levy without owner approval. Ordinary levies are approved at the AGM; special levies can be raised by trustees but must have a proper basis.
• Ignoring exclusive-use areas. If you have exclusive use of a parking bay or garden, you may owe an additional levy for its upkeep.
• Skipping the CSOS levy. Most owners pay a small monthly CSOS levy passed through by the body corporate.
• Treating short-term letting policy as informal. The registered conduct rules override any verbal assurance.

Consider two similar apartments in Umhlanga. Scheme A charges a R2,400 levy with a reserve at 120% of the admin fund. Scheme B charges R1,800 with a reserve at 20%. Six months into ownership at Scheme B, trustees raise a R95,000 special levy per unit to replace fire compliance equipment and waterproof the podium slab. The effective monthly cost jumps to R9,700 for the next 12 months. The cheaper scheme was, in retrospect, materially more expensive.

The FAQ block below the article covers the most common levy questions in detail. Broadly: levies can be increased year-on-year at the AGM; special levies can be raised by trustees for genuine unbudgeted needs; and unpaid levies remain a liability of the section.

Levies are the price of shared ownership. Well-run schemes charge fair levies, provision honestly for the future, and communicate clearly. Read the financials, read the plan, read the rules, and you will avoid the vast majority of levy-related surprises.