In previous articles, our panel of experts touched on the issue of levies payable by sectional title holders. This week, they deal specifically with the question of special levies.
A reader writes that he lives in a block of flats comprising 33 units, which was in need of extensive renovations. After a special meeting, the body corporate gave the go-ahead for the trustees to obtain quotes and proceed with the required work.
He mentions that very few guidelines, such as a limit on the total amount to be spent, were provided. As a result, three special levies were imposed – one of which amounted to R40 000 per owner.
In addition, the normal levy was increased by 10% and further levies were imposed on owners whose units included storage rooms and domestic quarters.
The reader is concerned that the trustees have overstepped their authority in imposing such high levies. He reports that some dissatisfied owners have even gone so far as to put their units in the market.
Pieter van Rensburg, principal of Chas Everitt in George says the levy paid by the members of a sectional title scheme provides for the maintenance and administration expenses relating to the complex.
“General levies are based on the annual budget and are raised by the body corporate at the annual general meeting,” says Van Rensburg.
“Special levies are raised by the trustees alone, even though our reader mentions that a special meeting was held and that the body corporate gave consent to the trustees to proceed with the work.”
According to Van Rensburg, it is standard practice for trustees to resolve to raise a special levy by majority vote at a validly constituted trustees’ meeting. They will also decide whether it will be payable in one lump sum or in instalments.
“As in our reader’s case, they may choose to consult with the owners before they make their decision, but, ultimately, only the trustees are empowered to make the final decision.”
Although the Sectional Titles Act 95 of 1986 does not address special levies, the management rules prescribed under the Regulations to the Act give trustees the power to raise such costs from time to time, confirms Braam Swart from Braam Swart & Partners in George.
Swart says this authority is subject to two requirements. “Firstly, the expense must be necessary and, secondly, it should not have been allocated for in the budget approved by the owners at the last annual general meeting.”
If the reader believes the trustees have irregularly raised a special levy, his remedy is not to withhold payment, cautions Swart.
“This may result in further expenses in the form of interest, collection commission and other legal costs. Rather pay the money while reserving, in writing, your right to reclaim it.”
The next step would be to declare a dispute and refer the matter for arbitration, says Swart.
“The reader’s problem highlights the importance of electing trustees with the necessary financial sense to make important decisions regarding the scheme, as these decisions will affect each owner’s finances.”
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