How sectional title levy stabilisation funds work
LEVY stabilisation funds are common in sectional title schemes designed for retired people. The rationale behind them is that retired people generally live off fixed incomes and cannot afford to pay large increases in their ordinary levies each year. These funds allow bodies corporate to either set the ordinary levies of their owners at a fixed rate or to keep increases at or below the rate of inflation.
Typically a levy stabilisation fund is funded by once-off payments payable by owners when they alienate their units. These payments are normally calculated by determining a percentage of the “profit” which an owner has made on his unit, for example, 25 percent of the difference between the acquisition price (the price the owner paid for the unit) and the selling price or market value of the unit when it is resold.
Variations include that estate agents’ commission will be deducted from the profit, or that an owner is exempted from contributing to the levy stabilisation fund if he alienates the unit to his spouse or if the alienation takes place within a certain period of time after he acquired the property, for example, two years.
Although owners benefit from the payments to the levy stabilisation fund over the years that they own a unit in the scheme, when the time comes for them or their deceased estate to contribute towards it there is often resistance to payment. Before you acquire a unit in such a scheme examine the wording of the rule carefully and take it into account when making your decision about how to hold the property.
The ninth presentation of the UCT (Law@Work) Sectional Title Scheme Management Certificate Course, which is due to start on November 30, deals with financial management as one of nine modules. Call Kate on 021 674 7818, e-mail firstname.lastname@example.org, or visit www.paddocks.co.za.