In a sectional title scheme, levies form the financial backbone for maintaining and managing the property. Levies are contributions that unit owners pay to ensure the smooth operation of the body corporate. Appointing a managing agent plays a pivotal role in managing these levies effectively, ensuring transparency, compliance, and cost efficiency. Below is a detailed breakdown of the types of levies and their significance (Mason, 2022).
1. Administrative Levy
The administrative levy is the primary contribution that covers the day-to-day operational costs of the scheme.
- Role of the Managing Agent: Drafts and proposes the annual administrative budget, which forms the basis for this levy. Oversees expenses such as staff wages, common area maintenance, and utilities.
- Key Contributions: Negotiating contracts with service providers to ensure cost efficiency. Monitoring expenditure to minimize unnecessary levy increases.
2. Reserve Fund Levy
The reserve fund levy is essential for long-term maintenance and unforeseen expenses.
- Role of the Managing Agent: Ensures compliance with the Sectional Titles Schemes Management Act (STSMA) regarding reserve funds. Assists with forecasting maintenance needs and setting appropriate reserve fund levels.
- Key Contributions: Preparing and maintaining a 10-year maintenance plan. Monitoring the reserve fund balance and advising adjustments when needed.
3. Special Levy
A special levy is raised for unexpected or urgent expenses not accounted for in the budget.
- Role of the Managing Agent: Assesses unforeseen expenses, such as storm damage repairs, and recommends special levies. Manages the collection and allocation of funds from special levies.
- Key Contributions: Ensuring transparency about why the special levy is required. Overseeing and coordinating projects funded by the special levy.
4. Management Fee Levy
This levy directly relates to the services provided by the managing agent.
- What It Covers: Financial administration: levy collection, bookkeeping, and budget preparation. Legal compliance: ensuring adherence to property laws and regulations. General administration: meeting coordination, minute-taking, and communication with residents.
- Inclusion: This levy may be incorporated into the administrative levy or listed as a separate line item in the budget.
5. CSOS Levy Management
The Community Schemes Ombud Service (CSOS) levy is a statutory requirement for all sectional title schemes.
- Role of the Managing Agent: Calculates, collects, and pays the CSOS levy on behalf of the body corporate. Ensures compliance with CSOS regulations.
- Key Contributions: Keeping the body corporate informed of CSOS requirements. Assisting with disputes filed with CSOS if necessary.
6. Exclusive Use Area (EUA) Levy
Exclusive Use Areas (EUAs) are portions of common property allocated for the exclusive use of specific unit owners.
- What It Covers: Maintenance and upkeep of EUAs, such as parking bays, gardens, or storerooms.
- Involvement of the Managing Agent: Ensures that levies for EUAs are charged unless the rules specify that individual owners are responsible for maintenance (Mason, 2022).
Additional Costs and Contributions
Utility Charges
- What It Covers: Shared utilities such as water, electricity, or gas.
- How It Works: Costs are apportioned based on Participation Quota (PQ) if individual meters are not in place.
Penalty Levies
- What It Covers: Penalties for breaches of conduct rules, such as noise violations or unauthorized alterations.
- How It Works: Imposed by trustees following due process.
Legal and Dispute Costs
- What It Covers: Contributions toward legal fees or dispute resolution services.
- How It Works: Costs may be recovered through special levies or charged directly to involved unit owners.
Optional Services Levies
- What It Covers: Enhanced or optional services like security upgrades or concierge services.
- How It Works: Charged to owners who opt in or benefit from the service.
How Managing Agents Optimize Levies
Managing agents bring expertise and systems that help sectional title schemes maximize efficiency and transparency in levy management:
- Efficient Budgeting: Accurate expense forecasting helps trustees minimize unnecessary levy increases.
- Arrears Management: In-house credit control services reduce levy arrears, ensuring sufficient funds for operations.
- Negotiating Savings: Securing competitive rates for services like maintenance, security, and repairs.
Key Legal Framework
- Normal levies are calculated based on the budget approved at the Annual General Meeting (AGM) and are legally binding once a trustee resolution is passed (Mason, 2022).
- Special levies must meet criteria of being unforeseen, urgent, and necessary. Trustees are authorized to raise these levies when required (Mason, 2022).
- Unit owners’ levies are based on their Participation Quota (PQ), which is tied to the size of their unit and its share in the common property (Mason, 2022).
Conclusion
Levies are an integral part of sectional title living, ensuring that properties remain well-maintained, legally compliant, and financially secure. Managing agents play a critical role in optimizing levy management, providing expert guidance, and ensuring transparency. By understanding the different types of levies and their purposes, unit owners and trustees can work together to ensure the financial sustainability of their schemes.
*For more detailed insights, refer to Mason’s Sectional Title Scheme Reference Guide (2022).
