Community Scheme Levies
In this article, we touch on the subject of Community Scheme Levies, why it is a necessity and the impact non-payment has on community schemes.
What Are Levies: In a Community Scheme, levies are a part of everyday life and have even been referred to as the “life essence” of a Community Scheme. Levies are determined by means of a budget which is an estimate of the schemes expected expenditure for the ensuing financial year.
Depending on the Rules of each Community Scheme, the budget is normally considered and approved at the Annual General Meeting (AGM). Once approved, the estimated expenditure becomes the income due and is then divided between all the owners. In Sectional Title developments, this is divided according to the units´ Participation Quota (PQ) to determine the monthly levy due by each owner. Freehold developments, such as registered Homeowners Associations, are divided in accordance with that outlined in the Memorandum of Incorporation (MOI). In most cases, with Homeowners Associations the levies are usually equal per property.
It is of the utmost importance that each owner understands what levies are, why they are important to the survival of the scheme, and the implications of late or non-payment of levies.
Levies are charged in advance each month in accordance with the split mentioned above. These levies cover the expenses within the scheme’s budget, which may include, but are not limited to:
Repairs, maintenance & general upkeep to common property
Administration of the scheme (bank, auditors, managing agents etc.)
Gardening/cleaning services, wages of general workers etc.
Municipal Charges (Eg. water, sanitation & electricity)
Legal costs, access control etc.
The non-payment of levies will result in the Scheme being unable to meet their required financial obligations, such as the payment of council accounts and other service providers, leading to the deterioration of common property and a decrease in property value for all owners. In some serious cases, the court may appoint a financial administrator to take over the Scheme from the committee members.
Implications of late or non-payment
Levies are due and payable, in advance, by the 1st of the month. An owner who pays late will be subjected to interest and penalty charges on his or her levy account.
An owner, who continually defaults on his or her levy payments is effectively being subsidised by other members of the scheme, who duly pay their levies on time. Defaulting owners, not having made a payment arrangement or defaulted on a payment arrangement, will be handed over to complex attorneys. Thereafter, legal steps will be taken against such owner to collect arrears. This will result in blacklisting, negative credit records, the sheriff auctioning the defaulter’s belongings or even his or her property.
It is important to note that once an account has been handed over, the owner will be liable, not only for the arrears on his or her account, but also for any legal fees that may arise from the legal handover.
This article forms part of Solvers comprehensive service provided to you – by keeping you informed and up to date with important news, including any changes to the Community Schemes industry.