No surprises! The hidden costs of sectional title properties to expect

Buying into a sectional title scheme can be an attractive option, offering a sense of community, shared amenities, easy upkeep, and often, more affordable entry into the property market. And while most on the property hunt will jump at the chance to get those keys in hand, there are a few hidden costs of sectional title properties that can catch even the most cautious buyer off guard. 

Beyond your monthly payment, the levies that come with these properties can add to the advertised price tag. These do play an important role in ensuring you live your best life in an apartment or estate, so here's an outline of each and how to navigate them confidently. 

Admin fund levy

If you've seen a sectional title property with trimmed lawns and patrolling guards, it's thanks to this levy. It covers the operational and administrative costs of running a sectional title scheme. This can include maintenance of common areas, security services, insurance premiums, management fees for the management agent, utility costs like water and electricity for communal spaces, and staff salaries. The admin fund levy of a property is calculated according to the participation quota. This is worked out by dividing the number of square metres occupied by the owner's section by the total floor area of all sections.

Reserve fund levy

Constant special levies can be both emotionally and financially taxing on sectional title owners. In response, the reserve fund levy was mandated by the Sectional Title Scheme Management Act 08 of 2011 to ensure schemes allocated funds for long-term maintenance, guided by a 10-year capital expenditure plan. 

These projects can include major repairs and capital improvements, such as roof repairs, repainting of the building, replacing lifts, or renovating and upgrading communal areas like a pool, children's play area, or clubhouse. This levy plays an important role in ensuring that owners collectively and sustainably ensure their investment is well-managed and property values are preserved. 

Special levy

While a reserve fund can take care of large expenses, unexpected or unforeseen costs can impact a sectional title scheme. Special levies are used for emergencies to make significant repairs or attend to billing errors outside of normal monthly expenditures. Receiving a notice for this can be stressful, but you can rest assured that this levy only happens occasionally in a well-managed scheme. To raise this levy, it needs to be strictly necessary and can only cover an expense that was not included in the budget approved by the last Annual General Meeting (AGM).

Exclusive use levy

Exclusive use areas are a part or parts of the common property that can only be used exclusively by the owner or owners of one or more sections. If you're lucky, your property could have exclusive access to a garden, parking bay, courtyard, storeroom, or patio. Of course, with this privilege comes the need to maintain the area. Exclusive use levies are an amount estimated sufficient to cover the costs of the maintenance, insurance, rates, taxes, and supply of water and electricity to the specific exclusive use area. Unlike admin fund and reserve fund levies, this is not based on a participation quota but is levied specifically to the holder of the exclusive use right.

CSOS levy

If you have challenges within your scheme, it can be a relief to have an organisation you can turn to for help. The Community Schemes Ombud Service (CSOS) was set up by government to assist with the issues in community schemes, including sectional title properties. This ranges from dispute resolutions, regulating, monitoring, and controlling the quality of all sectional title governance documentation, promoting good governance of community schemes, to fulfilling an educational function. To fund their operations, all schemes are required to pay a levy quarterly or annually; your contribution is based on this formula: (community scheme levy paid per unit - R500) x 2%.

Tips for navigating levies

Choose your property within a sectional title scheme wisely as this can impact the amount of levies you pay. 

Request the latest levy statement to fully understand monthly charges. Be sure to review the financial statements to understand the financial health of the scheme.

Attend all AGMs so you can understand the scheme's budget and how it will impact your levy contributions during the year. 

Speak to sectional title specialists

There's a lot to consider when buying in a sectional title scheme, but you can turn to local property experts in Mbombela (Nelspruit). Since 1986, Kellaprince Properties has provided real estate services built on trust and professionalism. Contact us to find your ideal home and get step-by-step guidance when buying in a sectional title scheme. 

FAQs

1. How do you calculate levies in a sectional title?

This depends on the type of levy. For example, admin levies are calculated and raised based on the budgeted expenditure for each financial year of the scheme. This levy will also take the size of an owner's section into consideration. On the other hand, the special levy depends on the amount needed to be raised for a specific project or expense. 

2. Do levies include water and electricity?

Yes, the admin levy is responsible for the day-to-day expenses of running the scheme, and this will cover utilities like water and electricity. If an owner has an exclusive use area that requires water and electricity, they will also be required to pay an exclusive use levy to cover these costs over and above the admin levy. 

3. Who collects levies in a sectional title?

Trustees are appointed to look after the finances and running of the sectional title scheme on behalf of the body corporate. As part of their responsibilities, they are expected to collect levies from owners within the scheme and pay any amounts owing to the municipality and other creditors for services provided. 

4. Does the levy cover my property's insurance?

Depending on the type of sectional title, insurance covered by levy payments only covers shared structures and common areas. This can include fire, theft, structural damage, and other risks. As an owner, you will need to insure moveable contents from your own finances. 

5. Can I refuse to pay levies?

Levies are important for the smooth running of the sectional title scheme and a non-payment can have significant repercussions for the welfare of the scheme and its residents. As a member, you are expected to pay or you will face significant legal and financial penalties. If you disagree with a levy, you are still required to pay contributions but can declare a dispute with CSOS. On the flip side, bodies corporate can also use CSOS to pursue debt recovery for unpaid levies, including interest charges and legal proceedings.

12 Feb 2025
Author Kellaprince Properties