WHY,HOW, WHEN ARE LEVY CONTRIBUTIONS RAISED!
Why?
Each body corporate is required in terms of section 3(1)(a) and (b) of the Sectional Titles Schemes Management Act of 2011 (“the Act”) to establish an administrative fund and a reserve fund, reasonably sufficient to cover its expenses. A body corporate’s expenses include the repair, upkeep, control, management and administration of the common property, payment of taxes and other local authority charges for electricity, gas, water, fuel, sanitary and other services to the building/s and land, any premiums of insurance, and sufficient for the discharge of any duty or fulfillment of any other obligation of the body corporate. Additionally, the body corporate must prepare a 10 year maintenance, repair and replacement (MR&R) plan and pay for its implementation from the reserve fund. Contributions are raised to gather the money necessary to pay for these expenses and usually make up the bulk of the funds credited to the body corporate’s administrative fund.
How?
The outgoing trustees estimate the body corporate’s expected expenditure from both the administrative and the reserve funds in the next financial year and these budgets are considered at the annual general meeting (“AGM”). Once approved by owners, perhaps with alterations, the trustees meet again to divide the estimated expenditure between the owners and work out what amount each owner must pay as their annual contribution, in what installments the contribution will be paid and what rate of interest will be charged on overdue payments. The trustees then notify each owner of the amounts due and each owner is then liable to pay their contributions, normally in monthly installments.
When do contributions and special contributions become payable, who is liable to pay them and what happens when units change hands during a financial year?
In terms of section 3(2) and (3) contributions and special contributions are due and payable on the passing of a resolution to that effect by the trustees of the body corporate, and may be recovered from the persons who were owners of units at the time when the resolution making the contributions due and payable was passed. However, if a unit is transferred during the course of the financial year or during the period in which a special contribution is paid, the new owner becomes liable to pay the contribution, pro rata, from the day of transfer.
This can become a contentious issue when, for example, a special contribution is raised and becomes due and payable after an owner has sold his unit but before the transfer of ownership has taken place. As soon as the unit has been transferred from the seller to the purchaser the new owner becomes liable for any unpaid portion of the special contribution . Similarly, if the day after transfer has occurred a special contribution is raised for something that occurred ‘before the purchaser’s time’ – the purchaser as the owner at the time the special levy was raised and became due and payable is liable to pay the special contribution.
