Sectional title levies versus freehold cost of ownership - Seeff offers insight
Category Expert Insight
When buying into a sectional title development, monthly levies and potential special levies are often deterring factors that could put off potential investors.
Gerhard van der Linde, Seeff's MD in Pretoria East, says while many people have the perception that levies are an expensive and sometimes unnecessary expenditure, it is important for buyers to keep in mind that no type of property ownership comes without expenses.
"Levies are important for the maintenance and upkeep of any scheme. Owning freehold property also has many associated costs and in fact more responsibilities than merely paying levies to a Body Corporate.
Levies in sectional title complexes are typically used for things like security, reparations, maintenance like repainting the building, the servicing of pools, clubhouses, parks, gardens, play areas and other communal areas.
The running costs of maintaining the scheme, administration and the paying of salaries to the caretaker, cleaners, security guards etc. are also covered from the levies".
Van der Linde says owners of freehold property have many monthly costs beside their bond repayments that include things like insurance, refuse removal costs, security features, ongoing maintenance, repairs and garden services.
"However, freehold owners often need to be involved hands on in the upkeep of their home and also have to source their own service providers for all the respective services that they need.
This can become a time consuming responsibility - one that you are spared from when you pay levies to a sectional title scheme".
Van der Linde continues that the levy is determined by the trustees of the sectional title scheme.
"An owner has access to the financial records of the scheme and should have a very clear understanding of how the levies are calculated. As an owner in a scheme you should attend the meetings of the scheme where these proposals are motivated and debated.
The trustees are appointed by the Body Corporate and once the budget for the financial year is determined and approved by the trustees this amount is then divided into a monthly levy among all the owners - based on the participation quote in the scheme.
Owners with bigger units will be required to pay a higher levy compared to an owner with a smaller unit".
Van der Linde concludes that the cost of maintenance and repairs should be provided for in a sectional scheme's ten year maintenance, repair and replacement plan and should be included in the scheme's reserve budget.
"The Body Corporate may only raise special levies in certain circumstances after the trustees have passed a written trustee solution to raise such levies.
Special levies may not be raised for normal maintenance expenses - as the special levy must meet an urgent expense.
Should the trustees raise a special levy that is not urgent or necessary; an owner may approach the Community Schemes Ombud Service".
Author: Tanya Van Buuren Botma