Understanding the importance of levy contributions
Levies are compulsory contributions collected from owners in Sectional Title Schemes to cover the costs of maintaining and managing common areas, facilities, ensuring security and preserving the value of properties within a community. Levies differ from municipal rates and taxes, which are paid directly to local government authorities. While municipal rates fund public services such as roads, waste collection, and public infrastructure, levies are used specifically for the upkeep of a private residential development or complex.
Levies generally fall into two main categories, namely, ordinary levies and special levies. Ordinary levies are regular contributions paid by property owners to cover the day-to-day operational expenses of a complex or estate. These expenses typically include security, garden services, cleaning of common areas, insurance, common property water and electricity, as well as administrative and management costs. Special levies, on the other hand, are additional charges that may be imposed when unexpected expenses arise or when important and costly projects need to be undertaken. Such expenses can include roof repairs, repainting buildings, upgrading security systems, or carrying out emergency maintenance work. Unlike ordinary levies, which are paid regularly, special levies are usually raised only when necessary and are often approved by the body corporate or homeowners' association.
Lerato highlights that a common misconception exists among buyers that levy payments only become due when they take physical occupation of their new unit. It must be noted that the obligation to pay levies arises from the date that the property is transferred and registered in the buyer’s name at the Deeds Office. Once transfer has taken place, the new owner automatically becomes a member of the body corporate and must take responsibility for all levies and contributions relating to the unit, regardless of whether they have or a tenant has moved into the property or not.
In recent years, the ever increasing costs of utilities, security and maintenance have led to higher than expected increases in levies across many South African residential communities. These increases can place financial pressure on homeowners, particularly during periods of economic uncertainty. Failure to pay levies can result in penalties, interest charges and legal action by the body corporate or homeowners' association. As a result, prospective property buyers are encouraged to consider levy costs alongside bond repayments and municipal rates when evaluating the affordability of a property.