INTRODUCTION - LEVY
The effective management of finances is crucial for community schemes in South Africa. One of the primary sources of income for a sectional title scheme is the collection of levies from its members. Levies are the contributions paid by owners to cover the costs of running and maintaining the community scheme. In South Africa, the Sectional Titles Schemes Management Act 8 of 2011 provides guidelines on how levy contributions may be implemented in compliance with the law, however the act may at times be misinterpreted. This article aims to shed light on the process of raising levy contributions within sectional title schemes, referencing the relevant provisions of the Act.
APPROVAL OF BUDGETS
PMR 17(j)(iv) and PMR 21(3)(b)
According to the Sectional Titles Schemes Management Act, the approval of budgets for the administrative and reserve funds is a crucial step in the levy-raising process for the ensuing fiscal year. PMR 17(j)(iv) outlines the order of business at general meetings, which includes the approval of these budgets. This approval must take place in accordance with the Act and the rules of the scheme.
PMR 21(3)(b) grants the Body Corporate the authority to increase contributions by a maximum of 10 percent at the end of a fiscal year. This increase is intended to account for the anticipated increased liabilities of the Body Corporate. However, such an increase can only remain effective until members receive notice of the contributions due for the next fiscal year. The Body Corporate must give members notice of these increased contributions through a written resolution, as specified in PMR 25, with necessary contextual changes.
NOTIFICATION OF CONTRIBUTIONS
PMR 25(1)(a)
After the approval of the budgets at a general meeting, the Body Corporate is required to provide each member with written notice of the contributions and charges due and payable. This notice must be issued as soon as possible, but not later than 14 days after the budget approval. PMR 25(1)(a) specifies that the notice should clearly state that members have an obligation to pay the specified contributions and charges.
COMPLIANCE AND GOOD FINANCIAL PRACTICES
It is essential for the Body Corporate and its trustees to adhere to the provisions outlined in the Sectional Titles Schemes Management Act to ensure transparency and fairness in levy collection. By following the prescribed procedures, the Body Corporate can effectively communicate the financial obligations to its members, fostering a culture of compliance and good financial practices within the scheme.
CONCLUSION
PMR 17(j)(iv), PMR 21(3)(b), and PMR 25(1)(a) outline key aspects of the levy-raising process, including the approval of budgets, the authority to increase contributions, and the notification requirements to members. Although PMR 21(3)(b) state contributions may be increased by a maximum of 10 percent, by Trustees on written resolution, the percentage increase will primarily be determined and agreed upon by members at an Annual General Meeting (AGM) where the proposed budget and percentage increase will be ratified. It is crucial for all stakeholders involved in sectional title schemes to understand and comply with these provisions to ensure the financial sustainability and efficient management of their schemes.