Levy complications in mixed use buildings

Although not the norm, there are many cases where sectional title developments are not standard residential buildings and have commercial units on the ground floor and residential units above.

“In these cases the levy amounts are sometimes debated among the owners in the different sections because of their different uses,” says Michael Bauer, general manager of IHFM property management company.

“The commercial component, in all likelihood, would not form part of the residential component and would not make use of the lift or other amenities in the building, such as the gym or swimming pool. Yet they will be subsidising the operational and maintenance costs of these because their participation quota dictates this. In cases such as these, the commercial owners would probably want their levies reduced by using a different allocation key, and this is possible in accordance with section 32 of the Sectional Titles Act, provided a special resolution is passed and written consent is given.

“The expenses of the sectional title scheme are usually itemised and the different line items in the levy budget – such as security and maintenance of the building – could be allocated jointly to those who use these. The other expenses, such as the maintenance of the lift, pool and gym, could then be allocated to the owners of the residential units only.

“On the other hand, some businesses might attract pests and would need pest control measures paid for by the commercial component only. A restaurant might also use more water and should be charged accordingly, and its electricity charges may be higher.”

He advises buyers who are considering buying units in a mixed use development to ask a few simple questions. First, check what the proportional quotient is for the unit they are interested in and how the commercial section differs. Second, find out what items the commercial section is paying towards and what sort of businesses are being run in the building.

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