During an economic downturn that has many of us tightening our belts, the last thing we welcome is an unexpected expense.
For owners in sectional title schemes, however, unexpected expenses are a real possibility. We all know we have to pay our general levy, which is the result of an owner-approved budget at each annual general meeting and is normally payable in monthly instalments. But we are also liable to pay any special levies that are validly raised by the trustees from time to time. General levies are part of our budgets, but special levies generally hit us out of the blue. We explain the law applicable to these special levies so you can be armed next time one is raised by the trustees in your scheme.
The Sectional Titles Act 95 of 1986 does not mention special levies. The management rules prescribed under the regulations to the act deal with special levies in prescribed management rule (PMR) 31(4), which gives the trustees the power to raise special levies from time to time provided that two requirements are met. The expense for which the special levy is raised must be necessary, and the expense must not have been budgeted for in the budget approved by the owners at the last annual general meeting. The trustees may decide in resolving to raise a special levy that it will be payable in one lump sum or in instalments and at whatever times the trustees think fit.
It seems from the wording of PMR 31(4) that the trustees have been empowered to raise special levies for unforeseen and unexpected expenses.
The requirement of necessity is difficult to interpret definitively as it is a subjective concept that may differ from person to person or from one board of trustees to another.
Also, the requirement that the expense item must not have been budgeted for creates the problem that technically the trustees cannot raise special levies to cover the shortfall when a budgeted item is underfunded.
Except for the requirements set out above, PMR 31(4) does not indicate what expense items justify the imposition of special levies. Disputes often arise when special levies are purportedly raised for expense items that appear to be improvements to the common property. Luxurious and non-luxurious improvements to the common property are governed by PMR 33, and require particular processes to be followed and levels of owner consensus to be obtained before they are authorised. Trustees do not have the power to simply raise special levies for improvements to the common property, as envisaged by PMR 33, without following the requisite procedures.
It must be noted that, in terms of section 37(2) of the act, the persons who are owners at the time the special levy was raised are liable to pay the special levy. This becomes especially important when a special levy is raised, and becomes due and payable after an owner has sold his unit but before the transfer of ownership has taken place. As soon as the unit has been transferred from the seller to the buyer, the seller may believe he is not liable to pay the special levy because he is no longer the owner of the unit. But because the seller was the owner at the time the special levy was raised and became due and payable, the body corporate is entitled to recover the special levy only from him and has no legal entitlement to recover the special levy from the buyer as the new owner in the absence of some other contractual deal.
Jennifer Paddock is a sectional title lawyer at Paddocks, a specialist sectional title firm. Call 021 674 7818 or visit www.paddocks.co.za.
Article Source: Paddocks Press
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