When the levy increase is just too high

Q: We live in a complex and our body corporate has proposed a levy increase that many of us feel is too high. What can we do?

Unhappy sectional title residents can raise their objections to what they consider unreasonable escalations at the next body corporate’s next annual general meeting. The best way to negotiate a lower increase is to review the financial statements to make sure that the proposed escalation aligns with the parameters laid out in the Sectional Titles Schemes Management Act no 8 of 2011.

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According to the act, the body corporate is not obliged to increase levies if the body corporate’s reserve fund at the end of the financial year is equal to or more than the levy income generated during that year. If, however, the reserve fund is less than 25% of the levy income generated during that year, the body corporate must make provisions so that it can provide for a reserve amount equal to 15% of the levy income for the new financial year.

In other words, levies can be increased by 15% in order to supplement the reserve fund if it is below 25% of the total levy income. When the reserve is between 25% and 99% of the levy income in that year, the body corporate should only increase levies by enough to cover the required repairs and maintenance to the common property that has been budgeted for within that financial year.

Another tactic homeowners might try is to find out what similar complexes in neighbouring suburbs are charging on their levies. If the proposed levy escalation will make the levies in your complex higher than the levies charged by comparable complexes, you can argue that it is in the greater interest of marketability and overall property values within your estate to keep levies as competitive as possible and the levy increase should therefore be reconsidered.

– Adrian Goslett, chief executive of Re/Max of Southern Africa.