Know your levy commitments

That’s the advice of Berry Everitt, MD of the Chas Everitt International property group, who says too many homebuyers – and first-time buyers in particular – are still unfamiliar with how levies work.

The levy is the amount paid monthly by each owner of a unit in an ST scheme into the body corporate account to at least cover the expenses in connection with the repair, upkeep, control and administration of the common property. These include the rates and municipal service charges relating to the common property, security costs, gardening, cleaning, wages and salaries and the insurance premiums for the scheme as a whole.

“In well-managed schemes,” says Everitt, “it will also include a contribution towards a reserve fund – a sort of savings plan to cover large irregular expenses, such as painting the buildings, or unexpected major repairs such as replacing a lift. This will hopefully obviate the need for the owners to pay ‘special levies’ to cover these expenses in addition to their normal monthly levies.”

Writing in the latest Property Signposts newsletter, he says that as a buyer in an ST scheme, you need to know, first of all, how the levies are calculated. “In most schemes they are based on the PQ, or participation quota of each unit, which is calculated by dividing the floor area of a particular unit by the total floor area of all units in the scheme – so the owners of bigger units pay more than the owners of smaller units.

“However, there are other methods of calculation and to prevent misunderstandings, prospective purchasers of ST must establish what their monthly levy will be, and how much it is likely to increase annually, before committing to the purchase.

“They should also find out whether there are any special levies currently in force or being planned. In addition, they should be aware that a garage or storeroom will probably increase their PQ and their levy.”

What is more, he says, they must be very clear on the fact that the payment of levies by ST unit owners is not optional. It is required by law, and failure to do can result in a judgment being taken and the defaulting owner’s property being sold in execution.

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