What is special levy?

The notification of a special levy can evoke much anxiety among homeowners, says Cameron Jansen, Broker/Manager of RE/MAX Central, whose office services the Sandton and the surrounding areas. He notes that homeowners who live within a sectional title scheme already pay a monthly levy, so it can bring about confusion or even anger when they are required to pay an additional levy.

“To answer what a special levy is and who it is applicable to, it is best to first define what a basic levy is. A basic levy is generated by a homeowner’s association or body corporate and is used to pay for things such as security, rates on the properties themselves and general maintenance. A special levy is an additional amount of money that needs to be raised for a project, upgrade or extensive repairs that is outside the normal monthly expenditure of the complex. These projects could include a security upgrade or adding a feature such as a swimming pool or club house,” says Jansen. “Typically we have seen several complexes that have raised a special levy to give the development a fresh new look. In the case where a complex has not been painted for a few years, a levy could be introduced to get enough money together to get that kind of work done.”

So how does a special levy get implemented? Jansen says that in a body corporate there are trustees who have been appointed by the homeowners within a complex. These trustees are responsible for making decisions with regard to what happens within the development. Once the trustees have identified a need for a special levy to complete a specific project, they will hold a special general meeting addressing the issue, making a proposal to the homeowners in the complex. Ideally the proposal should provide the homeowners with a detailed breakdown of the expenditure involved, as well as an explanation as to why the special levy is necessary. The meeting is an opportunity for the trustees to present reports from contractors and experts so that homeowners understand the reasoning behind the project. For example, if unattended a leaking roof will cause damage to the ceiling and possibly the contents of the property.  A vote will be held with a quorum of 80% required for the interim special levy to be implemented. 

Once the special levy has been agreed upon, there is the matter of payment. According to Jansen payment of a special levy can be made as a once off payment, over a three month period, six month period, a year or even longer. This will depend on the general conscious of the homeowners.

This brings about the question, what happens to the payment of the special levy if the homeowner decides to sell their property? “It is important that the seller makes their estate agent aware of the fact that a special levy is being raised or is currently being paid. This information should be relayed to any potential buyers, so they are aware of the fact before they purchase the property,” says Jansen.  “The incoming owner is liable for the levies from the date of transfer. Where a special levy has been raised, the seller must settle any outstanding amount before the trustees will issue a levy clearance certificate. However, settling a special levy before transfer takes place is not the ideal situation for the seller. The seller and buyer are entitled to come to an agreement whereby each party is responsible for a pro-rate share of the special levy.”

He concludes by saying that buyers who are purchasing a property within a sectional title scheme should request a copy of the minutes from the latest annual general meetings held by the trustees to ensure that they are not caught unaware of any possible planned special levies in the future. 

For more information regarding property in the greater Johannesburg area contact Cameron Jansen, Broker/Manager at RE/MAX Central on 083 653 5878 or 011 217 6900.

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