Com­ing to terms with dreaded sec­tional ti­tle spe­cial levy

Weekend Argus (Saturday Edition) - - PROPERTY - AN­TON KELLY

MOST peo­ple who buy sec­tional ti­tle units un­der­stand very lit­tle about the li­a­bil­i­ties and re­spon­si­bil­i­ties pe­cu­liar to this kind of prop­erty own­er­ship – un­til they en­counter them as the reg­is­tered owner of the unit.

But most have heard about the monthly levy, and the one they’ve heard about and, jus­ti­fi­ably, dread is the spe­cial levy.

The Sec­tional Ti­tles Act and the pre­scribed rules leave the de­ci­sion to raise spe­cial levies to the sole dis­cre­tion of the trustees. The act says a spe­cial con­tri­bu­tion “be­comes due on the pass­ing of a res­o­lu­tion in this re­gard by the trustees” and the rule says: “The trustees may… make spe­cial levies upon the own­ers.” It would be pos­si­ble for own­ers to agree to fund an ex­pense that they as a body must ap­prove – such as an im­prove­ment to the com­mon prop­erty – by spe­cial levy, but or­di­nar­ily own­ers don’t have a say, they must just pay.

The leg­is­la­tion does, how­ever, make the trustees’ power to raise a spe­cial levy con­di­tional on two re­quire­ments. The first is that the spe­cial levy must be nec­es­sary and the sec­ond is that a spe­cial levy can­not be raised to pay an ex­pense that was al­ready in­cluded in the bud­get ap­proved at the last AGM. Nec­es­sary means that a spe­cial levy can’t be raised for an ex­pense that can wait for in­clu­sion in the bud­get for the next fi­nan­cial year. The bud­get re­straint means that a spe­cial levy can’t be used, for ex­am­ple, to pay a main­te­nance ex­pense be­cause main­te­nance must be in­cluded in the bud­get. Spe­cial levies are for emer­gen­cies.

The li­a­bil­ity pro­vi­sions for pay­ing a spe­cial levy are slightly dif­fer­ent to the pro­vi­sions that gov­ern the li­a­bil­ity for the or­di­nary levy. The per­sons who are the reg­is­tered own­ers of units in the scheme on the date the trustees raise the levy, whether it is the an­nual levy or a spe­cial levy, are li­able to pay that levy. How­ever, when a unit is trans­ferred, the li­a­bil­ity for the an­nual levy shifts pro rata from the per­son who was owner at the time of the trustees’ res­o­lu­tion to the new owner.

The same is not true for the li­a­bil­ity for a spe­cial levy, though. If a spe­cial levy is run­ning at the time a unit is sold, the sell­ing owner must com­plete the pay­ment of the spe­cial levy be­fore trans­fer of the unit to the new owner.

An al­ter­na­tive could be an ar­range­ment in the sale agree­ment that ac­com­mo­dates pay­ment of the spe­cial levy. And the body cor­po­rate must be happy with the ar­range­ment be­cause that is a con­di­tion for the is­sue of a levy clear­ance cer­tifi­cate.

● An­ton Kelly is a spe­cial­ist s e c t i onal t i t l e and home­own­ers’ as­so­ci­a­tion teacher a t Pa d d o c k s . Vi s i t www. pad­docks.co.za

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