In this article, I will unpack the similarities and differences between the Sectional Titles Act 95 of 1986 (“the STA”), the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”) and the Community Schemes Ombud Service Act 9 of 2011 (“the CSOSA”), relating to levy collection in sectional title schemes. In doing this, we will take a look at the function of the trustees in determining and raising levies, the expenses which levies relate to, the types of levies and contributions recoverable, and the process of recovery of levies.
Let us first take a look at section 37 of the STA, setting out the functions of the body corporate which, in terms of section 39(1) of the STA, is performed by the trustees elected to represent the members of the body corporate. One of the most important functions of the trustees, is to establish, for administrative expenses, a fund for:
- the repair, upkeep, control, management and administration of the common property;
- the payment of rates and taxes, and other local authority charges for the supply of electric current, gas, water, fuel and sanitary, and other services to the building/s;
- any insurance premiums; and
- the discharge of any duty or fulfilment of any other obligation of the body corporate.
The trustees determine the amounts to be raised for the aforementioned purposes, and raise them by levying contributions on the owners, in proportion to their participation quotas.
Section 3 of the STSMA similarly sets out the functions of the body corporate which, in terms of section 7(1) of the STSMA, must be performed by the trustees.
The STSMA goes further by introducing the requirement for a reserve fund, containing amounts which are reasonably sufficient to cover the cost of future maintenance and repair of common property, but which are not less than such amounts as may be prescribed by the Minister in the Regulations of the STSMA, which is still in its draft form.
The STA and the STSMA provides that the trustees raise additional contributions on the owners who are entitled to the right of exclusive use, whether registered in terms of section 27 or created by the rules in terms of section 27A of the STA, as is estimated necessary to defray the costs of rates and taxes, insurance and maintenance, and the provision of electricity and water.
The STA and the STSMA further provides that the trustees require that the developer, who is entitled to extend the scheme in terms of a right reserved as set out in section 25(1) of the STA, to make reasonable, additional, contributions to the fund, as may be necessary to defray the costs of rates and taxes, insurance and maintenance, and the provision of electricity and water, of the part/s of common property affected by the reservation.
The STA provides that the liability for these contributions levied upon the members,accrues from the passing of a trustee resolution (for an article on the importance of this trustee resolution, take a look at “Levy contributions authorised by trustee resolution”), and may be recovered by the body corporate by action in Court of competent jurisdiction from the persons who were owners of units, holders of exclusive use areas, and holders of real rights of extension, at the time when such a resolution was passed. Provided that upon the change of ownership of a unit, exclusive use areas and real rights of extension, the successor in title becomes liable for the pro-rata payment of such contributions from the date of change of ownership.
Whereas the STSMA provides that contributions levied may be recovered by the body corporate by an application to an ombud, in terms of the CSOSA. In this regard, section 39 of the CSOSA sets out various prayers for relief which the ombud may make, including an order in respect of financial issues.
The STA and the STSMA provides that the trustees may from time to time, when necessary, make special levies / contributions upon the owners in respect of all such expenses not included in the budget for that financial year (see section 37(2B) of the STA and section 3(4) of the STSMA for a definition of “special contribution”).
The STA provides that any special contribution becomes due on the passing of a trustee resolution, and may be recovered by the body corporate by action in any competent court having jurisdiction, from the persons who were owners of units at the time when such resolution was passed. Whereas, the STSMA further provides that special contributions levied may be recovered by the body corporate by an application to an ombud.
In summary, the most noticeable amendments with regard to levy collection in sectional title schemes, is the future statutory requirement for a reserve fund for future maintenance and repair of common property, and the ability to apply to the Community Scheme Ombud Service for an order relating to the recovery of arrear contributions.
Should you have any queries or comments, please contact us at Paddocks on 021 686 3950 or at email@example.com.
Paddocks has designed a free, online guide to assist you in understanding the CSOS, the types of orders it can grant and the process of putting together an application for dispute resolution. Click here to visit the guide and minimise the chance of your order being rejected unnecessarily.
Article reference: Paddocks Press: Volume 12, Issue 04, Page 02.
Zerlinda van der Merwe is an admitted Attorney of the High Court, specialist Sectional Title Attorney (BA, LLB, LLM), Zerlinda brings a wealth of experience and forms part of the Paddocks Private Consulting Division.
This article is published under the Creative Commons Attribution license.