So, you bought your dream apartment in a well looked after community scheme and excited to live there for many years to come. But then you receive your first levy statement from the Managing Agent, and it states you need to pay some “levies”. This is not what you expected, or in your budget… If this sounds familiar, keep reading! In this article I will explore the concept of levies in the context of a community scheme.
As a member of a community scheme, one of the most important responsibilities you have is the payment of levies. Levies are the lifeblood of the scheme’s financial health, ensuring that the property is well maintained, compliant with legislation, and a pleasant place to live.  
Are levies really necessary and must it be billed? Let’s look at the legal basis for charging levies. The Sectional Titles Schemes Management Act (STSMA) No. 8 of 2011 and its Regulations provide for the collection of three types of levies: administrative fund levies, reserve fund levies and special levies. These are all vital to ensure the scheme functions well and remain well maintained. It protects your very valuable asset in the unit you own.
The Administrative Fund Levies are billed in terms of STSMA, Section 3(1)(a). Every body corporate must establish an administrative fund to cover the operating expenses of the scheme. This includes paying for services such as security, cleaning, insurance premiums, municipal charges for common property, minor maintenance, and managing agent fees amongst others.
The Reserve Fund Levies are billed according to STSMA, Section 3(1)(b) and Regulation 2. A reserve fund must be established and maintained to provide for future major maintenance and repair of common property. This would include big projects such as repainting buildings, replacing roofs, or resurfacing driveways. This ensures long-term financial stability and reduces the need for sudden special contributions.
Special Levies arise when unexpected costs are incurred, that were not included in the annual budget. Scheme Executives (Trustees) may raise a special levy as provided for in STSMA, Section 3(3). This might apply in emergencies such as structural damage, urgent legal matters, or essential infrastructure upgrades.
It is further beneficial to know how levies are calculated. Levies are typically calculated using each unit’s participation quote (PQ). This, PQ, is a representation of each unit’s percentage of its floor area, relative to the whole scheme. This ensures larger units contribute more to the funds of the scheme, and smaller units contribute less. Scheme Executives (Trustees) prepare an annual budget that is presented and approved at the Annual General Meeting (AGM), detailing all the expected expenses for the year, as well as the levies required to ensure these obligations are met.
Ensuring that you pay your levies is not just a legal obligation, but pivotal to the success of the scheme. Think about maintenance & safety, compliance, the value of your unit and fairness towards the other owners and residents living in the community scheme. With the above said, there are still some owners that think it is unnecessary to pay their levies. What happens if some owners don’t pay? 
The biggest impact when you don’t pay your levy, is on the scheme itself and the other owners in the community. When and owner defaults in their levy payments, there is not enough funds to meet the monthly obligations, as discussed in the administrative levy above. In many cases, municipal bills cannot be paid, as well as service providers like security, etc.
Prescribed Management Rule 25 (Annexure 1, STSMA Regulations) provides that interest may be charged on overdue amounts. The body corporate may further take legal action to recover arrear levies, including the recovery of taxed legal costs. This may cause the defaulting owner to have a judgment against their name, or in extreme cases, lose their unit at an auction. Prescribed Management Rule 20(2) further restricts some of the owner’s rights by disallowing them to vote at an annual meeting. They may also not stand as a Scheme Executive (Trustee).
As a final thought, levies are not just a financial obligation. It is an investment in your home, your neighbours, and your community. By paying on time, you ensure the value of your property is protected, a safe and pleasant living environment is created and your scheme remains financially stable and legally compliant.
James Stevens
Chief Operating Officer
WPM