Budgeting for maintenance in sectional title schemes isn’t optional

Owners and trustees in sectional title schemes should have a working knowledge of sections 37 and 38 of the Sectional Titles Act, because they define the main financial and administrative obligations of a body corporate, says Michael Bauer, general manager of IHFM property management company.

“The functions and powers of the body corporate are exercised by the trustees of the scheme in accordance with the provisions of the Sectional Titles Act and the Prescribed Management Rules. The owners, by passing a majority resolution at a general meeting, may restrict or direct the trustees to run the scheme in a certain way according to section 39(1) of the act,” says Bauer.

“The body corporate must establish an administrative fund that it believes will be sufficient to cover the cost of repairs, maintenance, management, municipal services, insurance premiums and other necessary expenses. It is important to note that the act explicitly states that reasonable provision must also be made for future maintenance and repairs.”

In terms of section 37, bodies corporate have a statutory duty to properly maintain the common property and to keep it – as well as machinery, fixtures and fittings – in a state of good and serviceable repair. The act does not define a standard as to what proper maintenance or good and serviceable repair is, so either the trustees or the owners should determine in a general meeting what their standard of repairs and maintenance will be.

“The bottom line is that repairs and maintenance are not optional. The body corporate can decide to carry out repairs and maintenance only if there is enough money left over in the reserves after the scheme’s normal operating expenses have been covered, but it does need to be done at some point.”

The body corporate has the authority to determine the amounts that must be raised to cover its administrative expenses, and to raise those amounts by collecting levies from owners in proportion to their participation quotas in the scheme. Bauer says that ordinary levies should be sufficient to cover a scheme’s operating expenses and enable it to build up reserve funds for maintenance and repair costs that are likely to arise in the future.

“It is clear from the act that the purpose of ordinary levies is not solely to cover day-to-day essential operating costs, and that keeping levies low is not always acting in the scheme’s interests,” says Bauer.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us