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Why has there been a Rise in Levy Liabilities in Sectional Title Schemes?

 
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Sectional title schemes that were financially poorly managed ran into various problems in the past. As a result a lot of distressed owners not only saw the scheme’s ongoing deterioration but also had to come to terms with the inevitable and sometime sharp depreciation in the value of their property investments.


It became difficult and sometimes impossible for owners in these schemes to sell their properties and even when they were able to find a buyer, banks were reluctant to grant mortgage finance to their buyers as the banks felt their security was at risk.


The legislator recognized this problem in schemes when it formulated the new Sectional Title Management Act, and addressed these shortcomings to protect owners in schemes as well as their investments by introducing the following new measures:


1. Compulsory creation of a reserve fund by the body corporate in addition to the administrative fund to cover future expenses arising from unforeseen or major maintenance to common property. The reserve fund will mitigate the need to raise special levies, which often come as an unexpected shock to owners in a scheme and often proves difficult to collect.

 

2. Compulsory creation of a maintenance, repair and replacement plan with a view to prepare for the maintenance of major capital items on the common property for a period of 10-years. This includes items like electrical systems, plumbing, drainage, heating, lifts, roofing, painting, security systems and recreational and parking areas. The maintenance plan is there to give owner’s peace of mind over the effective management of these future expenses.

 

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