One subject that can be relied on to cause disagreement between the owners and the trustees of bodies corporate is the level at which levies should be set, says Michael Bauer, general manager of IHFM, which manages bodies corporate and home owners’ associations.
“There are two principles here which should be observed. The first is that the levies should be sufficient to cover all the ordinary budgeted operating costs facing the body corporate – and members are usually able to accept that,” says Bauer.
“However, the other principle is that in every body corporate there will always come a point at which some unforeseen repair, maintenance, improvement or upgrade item will become essential – and this has to be recognised and allowed for in advance.
“For this reason, wise trustees will always add to their budget a little extra sum, increasing the levy by more than is actually required and allowing for a profit to accumulate reserves that can later be used for planned and unplanned repairs and maintenance.
“If this is done, the likelihood of special levies having to be raised at some stage, such as for lift repairs or the replacement of windows, can usually be avoided.”
He says special levies are always a shock to the system and cause owners to resent the trustees. However, they may be the only option open to bodies corporate that have no reserves.
“It is characteristic of all successful bodies corporate that they do increase their levies on an ongoing basis and are never forced to raise a special levy,” says Bauer. “Unsuccessful schemes invariably end up having to take this route and raise special levies, but collecting the funds in these cases from owners can be very difficult.”
Good managing agents will always coax the trustees into recognising the possibility of major repairs or other items becoming payable at some stage and make provision for that. At the same time, he says, members of bodies corporate should not be too complaint: they should go through the proposed budget figures which, by law, they have to receive two weeks before the annual general meeting, and they should check them thoroughly and take the opportunity to analyse them and question them critically.
IHFM has a weekly online newsletter covering sectional title and property matters that will be supplied on request. Call Michael Bauer on 083 255 4442 or visit www.ihfm.co.za.
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Dear Author
In the case where trustees fail to comply to the minimum maintenance requirements or are too slow to act apon – the loose use of “there is no money”, what course of action can be taken knowning that this can be relating to bad management – they cannot be held accountable or liable in any way and in saying that, the same seven trustees are re-ellected each year by nominating each other.
Whats important to note is that there are approx. 51% owners and 49% tenants and hardly any interest is shown by the owners, in the up keep of the property.
Thank goodness all creditors demands are being met as this is simply the reason of an independed company collecting the levies each month.
A special levy was introduce about ±4 years ago (owners are still repaying this special levy) and one is concerned that another special levy will most likely have to be introduced to complete the minimum maintenance shortfall.
I’ve been actively involved as trustee in the pass and made sound recommendations, but to no-avail.
It’s once understanding that the best cause of action is to hand the matter over to the “administrator” as one has little faith in the management skills of the trustees.
Dear Ashley,
Thanks for your email. Well, this is unfortunately more the norm then the exception. The best to do is to get new trustees elected by calling a special general meeting according to the requirements of prescribed management rule 53.
You will have to canvass (like a politician) for votes and proxies with an action plan and identify potential trustees (you can appoint or nominate professional trustees (we can help with that)) to the board and appoint a new managing agent who provides maintenance management.
To place the body corporate under administration will certainly not solve your problem, rather the opposite. The administrator will do nothing, pull a hefty fee, appoint an accountant or management agent to the books and that is about it. They will not do any operational management or maintenance.
Hope this helps.
Michael