Have trustees always had the right to call for a special levy?
The provisions empowering the trustees of sectional title schemes to raise a special levy have come and gone from the Sectional Titles Act and the prescribed rules.
Recently we were asked whether, because of those comings and goings, there had ever been a period during which the special levy provisions were completely absent, a gap in the trustees’ power to raise a special levy. Obviously the person asking the question was hoping the special levy he had had to pay was invalid and he was entitled to withhold his levy payments until the amount had been made up!
The Act does not actually refer to levies, it refers to contributions, and in section 37(1)(b) says the body corporate must require the owners to make contributions to the administrative fund, and later in the same section, to raise the amounts required to fill up the fund by levying contributions on the owners. Hence the term, “levies”.
Originally, there was no provision in the Act for special contributions, the provision was contained in prescribed management rule 31(4). PMR 31(4) gave the trustees the discretion to raise special levies but only under two conditions. Paying the expense had to be a matter of necessity and the expense could not be paying any item contained in the budget approved at the AGM for that year.
Then, in October 2011, PMR 31(4) was deleted, in error it seems, but did that mean that the trustees were then not entitled to raise a special levy? No, because in the meantime, in December 2010, sections 37(2A) and (2B) were inserted into the Act.
Section 37(2A) makes three provisions: First, it gives the trustees the discretion to raise a special levy; secondly, it provides a method to recover any arrears; and thirdly, it makes the persons who are the registered owners on the date the trustees take the resolution liable for the whole of the amount. This is unlike section 37(2), which provides for the pro-rata payment of the levy by a new owner from the date of transfer of the unit into his or her name.
Section 37(2B) is just a definition of a special contribution, really. It makes the point that a special contribution is a different contribution to the one based on the approved budget. So, the annual levy and a special levy are not the same levy.
The PMR 31(4) provision, which was deleted in 2011, reappeared in March 2013 in exactly the same words as PMR 31(4B). Significantly, the conditions of ‘necessity’ and ‘unbudgeted for’ are therefore back in place; they are not included in section 37(2B).
A glance at the diagram below gives a quick answer to the question that prompted this article. The trustees have and always have had the power to give the owners in their scheme a very nasty shock indeed!
Article reference: Paddocks Press: Volume 10, Issue 4, Page 2.
Anton Kelly is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the lead teacher on all the Paddocks courses for the last 5 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.
This article is published under the Creative Commons Attribution license.