Complex and estate levies – what’s fair?

Living in a complex or estate has many advantages, such as heightened security and well-maintained public spaces. Communal living comes with a price tag, though, namely the levies and taxes owners pay for the upkeep of the property.

Owners often complain that levies are too high – in some cases, increases of up to 65% have been reported. We find out what’s legal and fair, and what owners can do if they feel their levies are excessive.

Tip: Home and car insurance help protect your property. Consider taking out insurance today.

What do levies cover?

Every owner in an estate or complex must pay a monthly levy to ensure the scheme is run efficiently and benefits everyone. However, homeowners don’t always know what their contributions cover, says independent real estate professional Sarel Ueckermann.

“Levies cover everything on what is known as the common property,” he explains. “Anything outside your unit is part of that common property, unless you have exclusive usage of some part of it, like your garden.”

This means you pay for everything from water infrastructure and administration to garden services and security companies.

“Security is usually a non-negotiable in a big estate, but it can cost up to R1.7 million a year,” explains Ueckermann.

“Some schemes charge for items that didn’t exist in the past. For instance, it could cost a student village around R2.5 million a year to offer 10G of data per unit.”

Owners need to take all costs into account when they purchase a unit in a complex.

“Levies are a function of the costs, and the costs are fully mapped out in the budget for the complex, which is tabled at the annual general meeting (AGM),” explains Andrew Schaefer, managing director of Trafalgar Property Management. “Costs are linked to services and maintenance, so if you want levies reduced, look at where costs can be reduced.”

Are levies unfair?

Some owners feel they’re being overcharged and may be reluctant to pay “special levies” over and above their monthly contributions.

Trustees may request that owners pay special levies to cover emergencies or extra work – say, when a lift in a building has to be replaced, or a swimming pool has to be resurfaced.

Special levies can be raised under certain circumstances, but they can be limited in future, thanks to the Community Schemes Ombud Service Act 9 of 2011 (CSOSA). This act says schemes must set up a reserve fund to ensure there are enough savings to cover emergencies.

Unfortunately, it takes time for schemes to build up reserves, which must be equal to the income earned by the scheme in the previous financial year.

“If you have a turnover of R1 million, you must have R1 million in your reserve fund, and keep that going,” Ueckermann explains. He adds that the act should have been phased in over time to help owners, rather than implemented all at once, which has caused some financial distress to owners.  

Controlling the finances of schemes

Although trustees can approve a special levy regardless of how owners feel about it, there are ways to manage and control the finances of a scheme, says Schafer.

“Owners should always attend AMGs so they can review the budget, make recommendations to reduce costs, and vote on important issues,” he says. “Always insist on obtaining quotes, choose reputable contractors, and consider installing cameras instead of having security personnel patrol.”

According to Lauren Squier, an associate at Schindler’s Attorneys, trustees do not have absolute power. “Members can restrict the trustees’ approving expenses over R50,000, and require that the members approve these at a special general meeting or via round-robin,” she says. “There are ways to limit special levies and control your investment as a member – but it is important to be reasonable in doing so, as restricting the trustees severely will prejudice the running of the scheme.”

If you’re buying into a complex, ask your estate agent if you can look at the minutes of AGMs, levy statements, municipal accounts and complex rules, Schaefer advises. This will give you a good idea of whether you can afford to buy into it.

“There are free online courses that can walk you through estate living, with moderators who can answer any questions you may have,” Schaefer says. “Do your homework, especially if you’re a first-time homeowner. You don’t want to lose your home because you haven’t factored in all possible costs.”

If you’re not meeting your debt obligations, consider debt consolidation.