How sec­tional ti­tle levy sta­bil­i­sa­tion funds work

Weekend Argus (Saturday Edition) - - PROPERTY - JEN­NIFER PAD­DOCK

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 kate@pad­, or visit www.pad­

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