By Anton Kelly
 
Anton KellyMost people who buy sectional title units understand very little about the liabilities and responsibilities unique to this kind of property ownership – until they encounter them for real as the registered owner of the unit. But the thing they usually have heard about is the monthly levy, and the one they’ve heard about and – justifiably – dread is the special levy.


Raising a special levy
Both the Sectional Titles Act and the prescribed rules leave the decision to raise a special levy to the sole discretion of the trustees. The Act says a special contribution, “becomes due on the passing of a resolution in this regard by the trustees” and the rule says “The trustees may . . . make special levies upon the owners”. It would be possible for owners to agree to fund an expense that they as a body must approve – such as an improvement to the common property – by special levy, but ordinarily owners don’t have a say, they must just pay.

Two requirements for trustees’ raising a special levy
The legislation does however make the trustees’ power to raise a special levy conditional on two requirements. The first is that the special levy must be necessary and the second is that a special levy cannot be raised to pay an expense that was already included in the budget approved at the last AGM. Necessary means that a special levy can’t be raised for an expense that can wait for inclusion in the budget for the next financial year. The budget restraint means that a special levy can’t be used, for example, to pay a maintenance expense because maintenance must be included in the budget. Special levies are for emergencies!

Liability provisions
The liability provisions for paying a special levy are slightly different to the provisions that govern the liability for the ordinary levy. The persons who are the registered owners of units in the scheme on the date the trustees raise the levy, whether it is the annual levy or a special levy, are liable to pay that levy. However, when a unit is transferred, the liability for the annual levy shifts pro-rata from the person who was owner at the time of the trustees’ resolution to the new owner.

The same is not true for the liability for a special levy, though. If a special levy is running at the time a unit is sold, the selling owner must complete the payment of the special levy before transfer of the unit to the new owner. An alternative could be an arrangement in the sale agreement that accommodates payment of the special levy. And the body corporate must be happy with the arrangement because that is a condition for the issue of a levy clearance certificate.

 
Article reference: Paddocks Press: Volume 8, Issue 10, Page 1
 
Anton Kelly is the course instructor of the UCT Sectional Title Sales and Transactions and the UCT Sectional Title Meetings short courses. Next courses start, 4 November 2013. For more information please contact Liam on 021 686 3950 or liam@paddocks.co.za.

8 Comments.

  • Adam Asmal
    04/09/2017 16:11

    Hi, Can a special levy be implemented after the work has been completed? For example, the block is painted and months later at the next AGM a special levy is implemented to pay for the completed work. Should the special levy not have been implemented BEFORE the paint job started?

    • Nicole Tavares
      05/09/2017 11:03

      Dear Adam,

      Thank you for your comment. We are more than happy to help, however we do not give free opinions / advice. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you. Alternatively, join us on http://www.paddocks-club.co.za.

      Kind regards,
      Paddocks

  • Jacques Ellis
    26/10/2017 17:25

    Criteria and requirements to institute legal action against a member (owner) of a body corporate in a sectional title scheme to collect arrear levies and the funding of the legal costs thereof.

  • Good Day,
    I bought a unit and I was not aware of special levy at the time of purchase. On my first statement I realize the special levy which was raised before the time of purchase/transfer in to my name. Since then(5/05/2017) I’ve been disputing that special levy is not my responsibility but the previous owner. I have consulted a lawyer too but the also said it will passes to me according to legislation 3(3) of the body corporate law. I’ve been summons and charged interest on all those amounts which I was disputing. According to what I read in above It is not my responsibility. Please kindly advise and I would be happy to use your service it this the case and I in fact have a case.

    • Paddocks
      09/03/2018 16:05

      Hi Kami
      Thank you for your comment. We would love to help but unfortunately do not give free advice. Here’s how we can help:
      – We offer a Free Basics of Sectional Title 1-week short course. You’ll be able to ask your course instructor any related questions. Find out more here.
      – We offer consulting via telephone for R390 for 10 minutes. Please call us on +27 21 686 3950.
      – We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes. Find out more here.

      Kind regards
      Paddocks

  • Good day, I would like to know if the special levy can be raised for paying the Council’s service that the owners have already paid for to the managing agent, due to the managing agent did not pay the Council?

  • Leonard van Wyk
    25/11/2020 04:50

    Good morning. A special levy was raised to sort out our water account that was in arrears with about R140000 at the Minicipality. The money was paid , and a few months later it was found that the municipality, made a mistake and the money was paid back into the reserve fund of the trustees account. My question. Should that money not be paid back to the owners , seeing that the money raised for this issue was not utilized for its intended purpose

    • Paddocks
      25/11/2020 11:34

      Hi Leonard,

      Thank you for your comment. Please note that our legal team would need to advise you on your query. Please email consulting@paddocks.co.za and the team will provide a no-obligation quote for their assistance.

      Kind regards
      Paddocks