What do all these line items on my levy statement mean?

If you own a Section in a complex or an erf in an Estate, or even if you are a tenant in a complex. Chances are, you will receive a monthly Statement from the Complex (Body Corporate or HOA). In fact, if you are an owner and you don't receive one, INVESTIGATE. You will still be liable for the costs even if you do not receive the statement.

This question pertains closely to the age-old inquiry of "what are we paying levies for".  It's a crucial question. A blog post delving into that very question can be found here.

We will attempt to explain all the various charges you may find on your monthly statement and what they mean.

Please be aware that this directly relates to the Description methodology utilized by GMA.  These Descriptions can however provide you with insights into charges made by other Manging Agents. It is also important to understand that some community schemes could have 10-line items on their monthly statements, whilst other community schemes could merely have 2-line items, this depends on the wants and needs of each individual community scheme. Let's start!

Levy Related Charges

Community Schemes have the power to determine amounts required for an administrative and reserve fund, this allows for them to levy these contributions to their members (the owners of units), it allows for them to raise the money that it needs to perform its duties and exercise its powers.

Levy charges relate to the collection of these funds, these funds are needed not only to maintain the building, but to run its daily operations. Generally, a monthly levy would be the minimum charge that you will find on your statement every month.

Monthly Levies:

This is the base charge, which is charged either equally for Homeowners Associations, or in accordance with the size of your unit (PQ- Participation Quota) for sectional title units. This charge is implemented to ensure that all community schemes recover the costs incurred in its operations and not merely for one specific purpose. What this means for example, if you have security guards appointed to oversee the security of the building, but you are not charged a security levy on your monthly statement, then this expense would be covered under your monthly levy charge. The same would apply for items such as refuse removal, consumables like water and sewerage and even gardening services. Depending on how the scheme chooses to collect these various contributions, it could all be capped under your monthly levy charge.

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Simply put, when a budget is approved at your Annual General Meeting, this charge covers all expenses on the budget, except if another levy or recovery is in place to cover that particular expense.

Typically, the following generally covered by a schemes Monthly Levies:

• Bank Charges
• Annual Audit Fees
• Building Insurance expenses
• Management & Administrative Fees
• Legal Fees and or Consultations
• Any costs relating to the delivery of a service on behalf of a complex.  This could include an insurance evaluation. Training for Trustees or a company to assist with drafting of a 10-year maintenance plan.
• Salaries to employees, Gardeners, Caretaker etc
• Any monthly agreement such as Garden Services, or pool cleaning, security guards or armed response.
• Costs to cover for the repair and maintenance of current common property areas that can be of current concern.
• Other consumables such as airtime for an intercom or petrol expenses for a caretaker.
• For the payment of rates and taxes and other local municipality charges for the supply of electricity, gas, water, fuel and sanitary or other services to the building or land.

Reserve Fund Levies:

The Reserve Fund levy was introduced in 2016 with the Chages made to the Sectional Titles Act. The purpose for a reserve fund is intended to promote the sustainability of the buildings and other capital works in sectional title schemes by ensuring that current owners put aside sufficient funds to ensure their regular maintenance and repair and prevent gradual degradation into disrepair due to the body corporate having inadequate funds for timely remedial works.  This is the main source of income for maintaining the complex (Maintenance, Repair and Replacement expenses). This levy should be based on the 10-year maintenance plan from which the Trustee can try to plan for future expenses such as: -

• Wiring
• Lighting
• Electrical systems
• Plumbing
• Drainage and storm -water systems
• Heating and cooling systems
• Lifts
• Carpeting and furnishings
• Roofing
• Exterior painting and waterproofing
• Communication and service supply systems
• Parking facilities
• Roadways and paved areas
• Security systems and facilities
• Any other community and recreational facilities

From 2016, these two levies should be included on your Monthly Statements. In case you do not see the Reserve Levy, the costs are then included in the Monthly Levy, however, it would be advised to split these two levies on your monthly statements to ensure that all owners within sectional title schemes are aware of their monthly contributions and to where these contributions are allocated to.

Special Levy:

A special levy is just that, a special contribution. This relates to any other contributions levied for a special reason. They are normally levied during the course of a year, and always in response to unexpected expenses that cannot be met from the scheme's existing budget or funds. These expenses can generally not be delayed and are often not able to be included in budget preparations for consideration by the members at an AGM.

This is a usually a "time limited" levy and normally imposed for a specific project or expense and implemented for a fixed time frame. For example. If your community scheme does not have enough money to attend to urgent repairs caused by a storm. The insurance has rejected the claim, and the roof has blown off of the guardhouse. The Trustees or Directors can decide to impose a Special Levy to collect the funds needed to rebuild the roof on the guardhouse for 6 months. There are procedures and rules around implementing these levies, which we will not be addressing in this post. It is often possible that an accounts department would not know what this levy is for by heart. In that case, please review the communication sent regarding the imposing of this levy, request an explanation from someone more senior such as a Portfolio Manager or even ask the Trustees or Directors who would have initiated the levy.

CSOS Contribution

The Community Schemes Ombud Services Levy, which is charged to all members of community schemes monthly, is a legal requirement which was imposed when the CSOS Act came into effect in 2011.

This levy is recovered by all community schemes in South Africa. This levy is a requirement, which is paid to CSOS quarterly in accordance with the Community Schemes Om bud Service Act, 2011. The Calculation can be found at Chapter 2 of this document.

Other Recovery Charges

These recoveries vary per scheme. While there can be many of these types of charges, there are also often none. Contributions such as these normally cover a specific expense. While Monthly Levies normally cover most expenses, if you have (for example) a Security Contribution, it usually means that this Security cost is no longer part of the Monthly levy but recovered merely to cover the schemes security expense monthly. These types of charges usually serve two potential preposes.

1. It serves to provide a bit more month to month transparency. That means you know that this levy goes to that expense, without needing to assess the complexes' annual budget to find out.
2. It allows investors to potentially request their tenant to pay for that charge (if it is covered in their rental agreement). Because it is not part of the Monthly Levies but rather a separate charge.

These types of contributions can vary, therefore there is a small list below of the various types of recoveries generally used within Community Schemes.

Security Contribution

Typically, this denotes a monthly fee for security services, encompassing aspects like armed response or maintenance for security systems. Primarily, it pertains to the expenses associated with guards stationed at the complex.

Parking Contribution

In specific residential complexes, there might be an additional levy designated for parking. Residents are typically informed of this, and it pertains to a monthly charge for an extra allocated parking space. If unsure about its purpose, please inquire with your Management Agent.

Estate Levy Contribution:

Frequently, you'll encounter a situation where one Body Corporate operates within another complex, such as an Estate, possibly even within a gated area. In these instances, a levy may be imposed on all residents within that estate, including residents of other complexes, houses, and of course, your own complex. While each resident is responsible for paying this levy, it's often collected by your Body Corporate as part of your levy statement and then forwarded to the Estate. The specifics of what the levy entails can be obtained by reviewing the Estate's budget. Typically, though, it encompasses many of the same expenses covered by your monthly levies for your Body Corporate, but in this case, it's allocated for the Estate.

EUA Contribution:

Furthermore, in addition to the levying of contributions mentioned earlier, the STSM Act mandates the body corporate to recoup from the holders of exclusive use areas and holders of future development rights the anticipated costs for maintaining, repairing, and replacing the common property within those areas.

An EUA levy is an uncommon charge but is necessary for those who hold an Exclusive Use Area (E.U.A). A simple example of this could be a garden or a parking area. Typically, a parking spot or garden is considered regular Common Property, which means it may also be utilized by another Owner (even if there's a fence, the legal status remains unchanged). To rectify this and grant you exclusive rights to the use of that area, certain approvals are needed, steps must be taken to register the E.U. A's, and appropriate procedures must be established. Once these steps are completed, a levy may be imposed on each E.U.A owner for the anticipated costs of the area.

Various others

Various other levies or contributions of a similar nature can exist that have a similar situation for recovering a specific expense, these could include but are not limited to: -

Generator

Garden Contribution

Geyser Excess

Management Fees

Meter Reading

Access Control

Utility Related Charges (Recoveries)

These charges relate to recoveries for Utility based expenses. In short, most complexes receive a monthly Municipal account from your local Council. This will differ from complex to complex but normally the charges listed below are on this statement.  The complex is required to pay this bill every month. The consumption of these services is however due to the individual units and must thus be recovered from each unit. In essence, Council bills the Complex, then the complex bills each individual unit.  These recoveries have many forms, and they differ from one complex to the next based on many factors.  The factors may include.

• Does the complex have separate electricity or water meters?
• Does the complex have prepaid?
• The Tariff System of your local Council
• The plumbing in the building (could not allow for the installation of water meters)
• Your complex may have a separate company that charges, calculates and recovers Utilities.

In essence council does not charge you directly, but via the complex. The task of the Trustees here is to ensure that the Complex collects enough to pay the Municipal bill. Let's list examples with a breakdown. Kindly remember that these conform to GMAs charge methodology and can be different at other complexes.

Electricity Consumption - Usually shown as a variation of |Elec 578462/578832

This is a charge for the Electricity your unit used based on a reading that was taken.  The readings are normally +- 30 days apart and most readings are taken around the 15th of the month. In essence to do the calculation we need to first calculate the consumption. By subtracting the Latest reading from the Previous reading, you obtain the consumption in this example the consumption is 370kWh.  The consumption must then be used to calculate the amount based on the local Council's tariff rate.

Some municipalities have a simple multiplication, others work on a step system that increases the cost per kWh the more you use in a month. These tariffs are usually amended annually in July.

Common Property Electricity

This is normally a charge to recover any number of the following: -

• AMP charge (a fixed charged form Council to the complex)
• Common Property Electricity, referring to the cost for running outside lights, electric fences, gate motors etc. Basically, electricity usage outside of the unit.

This is a larger amount that is normally split between the units in PQ or an even divide.

Water Consumption - Usually shown as a variation of | Water6352/6395

This is a charge for the Water your unit used based on a reading that was taken.  The readings are normally +- 30 days apart and most readings are taken around the 15th of the month. In essence to do the calculation we need to first calculate the consumption. By subtracting the Latest reading from the Previous reading, you obtain the consumption in this example the consumption is 43 KL.

Some municipalities have a simple multiplication, others work on a step system that increases the cost per KWH the more you use in a month. These tariffs are usually amended annually in July.

Common Property Water

This is normally a charge to recover any number of the following: -

• Common Property Water, referring to any water used by the Common Property such as watering plants.
• This will normally also include any outside taps. If you see a neighbour wasting water, address it, you are paying for that too.

This is a larger amount that is normally split between the units in PQ or an even divide.

Sewerage Consumed

Similar to Water, this will just relate to a sewer charge. Some local Councils charge a fixed monthly rate, others would like this with the water usage (using a what goes in, must go out rationale). Normally if you have a water charge, you will probably also have a sewer charge.

Common Property Sewer

Similar to Common Property Water, this will just relate to a sewer charge.

Refuse Removal

Refers to a charge from the local Council for the removal of Refuse or waste on a regular basis. This charge is sometimes found directly on your Municipal rates statement, though that is rare in Gauteng. This charge is also often covered by the Monthly Levies since it is almost always a fixed charge that normally changes once per Annum.

Water Demand Charge Recovery

Refers to a specific water Charge the Council could levy based on the average usage of the building. (This is usually used during periods of water scarcity or in high water demand tariffs)

Water Heating Contribution

This is a rare charge, but if you do have a charge similar to this it normally relates to a charge for water heating.  Certain complexes have central water heating systems, this could be a boiler or a new heat pump system. In such a scenario, you usually don't have a geyser in your unit.  The positive is that you do not use electricity to heat your own water, but that you are required to pay a fee for your warm water usage. This is normally measured and comes at a higher rate than cold water since it is heated somewhere else.

Administrative Charges:

Administration charges relate to various ad hoc charges that may be charged to your account. This includes things like Interest, Conduct letters, administration fees and penalties. A more detailed blog post will be made to delve into these.

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I want to thank Ashley du Preez and Emilia Trump for their input in wiring this article. As always, your dedication and assistance mean the world to me.