It is a common misconception that the need for special levies in sectional title schemes was banished with the introduction of the new legislation which regulates the management of sectional title schemes.
What has contributed to the confusion is the compulsory reserve funds that schemes must maintain for repair and maintenance of the common property.
As a result, many new owners of sectional title schemes are surprised when they receive notice of a special levy.
A special levy is an additional amount of money that must be raised to pay for a project, upgrade or extensive repairs that are outside of the normal monthly repair and maintenance plans and requirements.
Monthly levies are collected and held in the scheme’s reserve fund which is used to carry out planned repair and general maintenance and upkeep.
In other words, special levies are required when an unexpected event or emergency comes up.
According to section 3 of the Act, body corporate trustees are still entitled to decide when a special levy or contribution is required from the owners of the scheme.
The new Act is not much different to the previous Sectional Titles Act in that owners of the scheme don’t have the right to refuse to pay a special levy.
However, it must be evident that the unforeseen expense is in fact necessary and cannot wait until the following annual budget it compiled.
An important note to make when comparing the old and new Acts is that the new legislation states that when a sectional title unit is sold, the liability for payment of the special levy now passes automatically from the owner to the buyer.
The old legislation required the seller of a unit to settle any outstanding special levy amount in order to obtain the levy clearance certificate from the body corporate.
The STSMA has clearly stipulated that when a unit is sold in the scheme, the successor in title will automatically be liable for the pro-rata payment of any outstanding special levy amount from the date when the change of ownership was registered.
This can create much frustration for the new owner as he or she may feel that it is unfair to pay for events that may have taken place before the sale agreement was signed.
Furthermore, a seller who chooses not to disclose to the buyer that a special levy is imminent, can expect to be held liable to the buyer for a latent defect.
For these reasons, it’s crucial that all parties involved with the sale of a sectional title unit must make sure that the sale agreement clearly states who will be liable for the payment of ordinary monthly levies and any special levy instalments that are already or may become due after the date of transfer and/or occupation.
Buyers of sectional title scheme units must keep their wits about them and be especially cautious of inheriting an obligation to pay outstanding special levies that the previous owner failed to pay.
There are some important changes to be aware of with the new Sectional Title Schemes Management Act, especially for potential buyers of sectional title homes.
Our property attorneys specialise in sectional title scheme queries and are ready to provide you with legal assistance and advice to help you prepare for all the financial requirements that come with buying a sectional title unit.
For more information about special levies, or any other matters related to sectional title schemes in South Africa, don’t hesitate to contact our attorneys in Cape Town and Johannesburg today.
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