Why pay a levy?

The short answer, because the Sectional Title Management Act says so! Let's take that as a given, but you still don't understand what it's for. As with some of my previous posts, we will try to shed some light on the matter with everyday examples. This aims to explain why the law is required rather than trying to justify its existence and to do it in a way that makes sense to the everyday person. With that said, I am not quoting the Act verbatim, allow me leniency for colouring over the edges :)

Let's consider for a moment that you own a house on a normal street, not in a Complex or Estate, not even in an enclosed area. Just a normal house with address: 526 Expensive Street.

In this scenario, you will be responsible for everything, that includes repairing and maintaining.

• Gardens
• Plumbing
• Electrical wiring
• Roofs and ceilings
• Walls and paint
• Boundary walls
• Security including gate motors, electric fencing, alarms etc.
• Pool and pool pump.
• Paving

The inside and the outside of the house is your responsibility to maintain and repair, all the way to the erf's edges at which point responsibility is changed to either the local municipality or to your neighbour.

For HOA (Homeowners Association's), where you own the erf, this remains almost the same, however, you may have some limitations, such as aesthetic requirements for your house, to enquire about these sorts of rules, you will need to make contact with the Directors of your HOA.

Regarding Sectional Titles, there's a significant distinction. Put simply:

• You, as the owner of a section, bear the responsibility of maintaining everything within the boundaries of your unit or section.
• The Body Corporate is accountable for the upkeep outside of your unit (the Common Property).

• There are exceptions, like geysers, (which remain the owner's responsibility but are typically covered by the complex's building insurance) however, we won't delve into those exceptions at this moment.

This indicates that the monthly account you receive from the Body Corporate, or HOA (Known as your Levy Statement) is intended to cover these expenses. We will not be going into each of the potential line items on the statement, that can be found here. Our focus will be specifically on the levy aspect, including Monthly Levies and Reserve Fund Levies.

These two levies combined must cover all the expenses to maintain the Common Property, which essentially refers to everything outside of your unit. It is crucial to understand that this levy DOES NOT extend to covering any expenses inside your unit. It's a common misconception to assume that these expenses might not be substantial, however, there's a lot more involved in managing these costs, knowledge of which is typically only fully grasped by active Trustees, Caretakers, or Managing Agents.

Time for an example! Pool time.

The residential scheme that you reside in, named ABC Body Corporate and comprising of 80 units, has a charming pool equipped with a pump, beautifully blue and sparkling, such a delightful addition to any community scheme. This mid-sized pool measures approximately 3x5 meters, offering a serene and inviting oasis. Now, envision having a similar pool in a standalone house- while not overly large, as older pools may even exceed this size!

We will dissect this into two categories: Events - such as the pool pump malfunctioning and Regular Monthly Maintenance - which ensures that the pool remains beautifully blue every day. While examining these aspects, it's crucial to bear in mind that both require financial resources, time and investment.

Event: The pool pump has malfunctioned

On Saturday, the pool pump suddenly stopped working. Your partner is upset, kids eager to swim, guests are coming over next weekend for a braai, this needs to be fixed promptly.

The Event Occurs at 526 Expensive Street:

It's 6PM, and upon arriving home, it's time to check the pool. After a brief search for the multi-meter, which the kids had borrowed, you locate it. You proceed to inspect the fuses and trip switches, confirming that the pump has power, yet it remains non-operational. Feeling puzzled, you decide to contact a pool repair service or consider disassembling the pump to take to the local pool shop.

Upon inspection, the repair service delivers a quote of R15 000.00. They explain that the filter sand needs replacement, and unfortunately, the pump is obsolete with no available parts for repair - it requires a new one. Despite the initial shock and mini heart attack you have just had, you manage to compose yourself and politely inform them that you'll be in touch. Then, you embark on a frantic quest for additional quotes.

After numerous inquiries and deliberation, you eventually secure a repair service that guarantees to fix the pump before the weekend - a necessity given the impending braai. However, their urgency comes with a price, totalling R17 500.00. Relieved yet slightly drained, you consent to the cost, knowing that it is essential to have the pool operational for the upcoming weekend.

The Event Occurs at ABC Body Corporate:

It's 6PM, you receive word that the complex pool pump has malfunctioned. Without delay, you promptly contact the caretaker, trustees, or managing agent about the issue. They take swift action, and the pool pump is repaired promptly, with no direct cost to you. While technically not costing you anything extra that week since it's covered by your levy, it's important to acknowledge that the repair was facilitated by the collective funds of the complex.

While the pool may not have been fixed in time for your Saturday pool party due to factors beyond your control, such as the repair process timeline, this approach ultimately saves you time, money and effort. While you may noy have the ability to expedite the process by spending additional complex funds to have it fixed immediately, this ensures that the funds are used appropriately and in accordance with the complex's guidelines, preventing any misuse of funds.

Consider the differences between the two scenarios:

Often overlooked, if the pool were located at 526 Expensive Street, you would be required to facilitate contractor access, allocate time for obtaining quotes, potentially initiate an insurance claim, supervise the installation process, oversee testing and ensure that the pool is returned to its pristine state. Furthermore, you would need to handle payment, organize invoices and manage the warranty documentation. When managed by a group of Trustees, these takes remain the same but extend to include additional responsibilities. Trustees must evaluate quotes on behalf of the entire complex, ensuring they are cost-effective, oversee the contractor's visit and installation, provide approval for completed work, and report back at trustee meetings.

In short, you spend almost NO time.

Financial Impact:

To simplify the calculation, suppose the complex also incurred a cost of R17 500.00 to replace the pump. In essence, this expense translates to only R218.75 per unit (assuming all units are of equal size) [R17500.00 / 80 = R218.75]. Let's play devil's advocate and say that a pool pump's lifespan is shorter within a complex. Despite this, the economies of scale at play still yield significant savings.  Thus, saving you time and money!

For instance, let's consider the hypothetical scenario where a pump lasts 10 years at 526 Expensive Street but only 5 years at ABC Body Corporate. Over a span of 10 years, the cost breakdown for the owner's would be as follows:

• R 17 500.00 at 526 Expensive Street
• R 437.50 at ABC Body Corporate (Because it was replaced twice in 10 years)

Do you notice the substantial difference in costs?

Regular Monthly Maintenance and Upkeep:

A pool also comes with monthly expenses, these include, chemical treatments, periodic refilling, cleaning tools, and perhaps a Kreepy Krauly (a South African Invention!). Not to mention the time spent to clean and maintain it. For a moment let's consider a scenario where you are fortunate enough to have a weekly pool service at R1200.00 per month. For a complex, double the cost might be incurred due to increased usage.  The cost: -

• R 1 200.00 per month at 526 Expensive Street
• R 30.00 at ABC Body Corporate [R2400.00 / 80 units = R 30.00]

And don't forget, as a resident your time and effort for the pool is ZERO.

What does all of this mean?

None of us eagerly anticipate the annual levy increase yet is it inevitable and indispensable. It is needed because it not only sustains the upkeep of the building you call home, the investment you've chosen to be a part of, but also covers the services you receive as a result:

• Your levy ensures your safety through security measures and guards.
• It safeguards your property by covering building insurance costs.
• It saves you time by delegating maintenance of the common property to others (a heartfelt thank you to the Trustees/ Directors)
• It facilitates financial planning; if managed effectively, special levies can be avoidable, allowing you to budget without unexpected expenses. (Just remember, the interior remains your responsibility.)

None of us purchase a unit in a dilapidated Complex, we aspire to reside in a vibrant community adorned with greenery and splendid gardens. The only way to maintain such standards is through the dedication of a committed group of Trustees and owners who contribute a fair levy.

I hope these examples serve to enhance your understanding of the purpose behind levies. My aim is to provide context and underscore that, despite appearing costly, living in a complex is often far more economical than owning a standalone house, notwithstanding the challenges that come with communal living.

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