Levies need to be set at the correct level

Posted On Monday, 30 October 2017 21:16 Published by
Rate this item
(0 votes)

In some sectional title schemes, trustees might think keeping the levies as low as possible would be beneficial to the owners, but this is sometimes incorrect.

 Mandi_Hanekom_Propell

Levies might be so low that the residents have to be called on repeatedly to pay special levies or much-needed maintenance might be neglected, says Mandi Hanekom, operations manager for sectional title finance company Propell.

Prospective buyers should, when viewing sectional title properties, assess the levy structure in relation to the amenities provided – and then consider what these amenities might cost them each month if they owned a freestanding home. If, for example, there is a swimming pool and clubhouse with a community garden and entertainment area, or excellent security, this will add to the monthly levy payments each month, but these amenities also contribute to the owner’s enjoyment of living in that scheme. Prospective buyers should also take into account other expenses, such as the running costs of electric fencing and the salary costs of security guards or gardeners.

If the trustees manage the scheme well, the scheme will have sufficient cash flow to meet its month to month running expenses and will have planned for the coming five to ten years’ maintenance on the building. In addition, the scheme will have enough cash in its reserve fund for major repairs (which is a legal requirement now).

If the owners’ levy payments are set too low, this could lead to the trustees running the scheme in a “survival” mode where just the necessary bills are paid each month and repairs or maintenance (such as painting or waterproofing, for example) are not attended to. This then starts a downward spiral with more funds needed for repairs and maintenance as the building’s condition deteriorates. This could, in turn, lead to a drop in value for sections and decreased popularity of the scheme.

This is particularly important in older schemes where more maintenance will probably be necessary and where high budget items such as roof or lift replacements might become necessary.

Potential buyers should check the financial statements, budget and trustee resolutions of the scheme they are interested in carefully, as these will show what amounts have been budgeted for, whether the scheme has savings put away, or not, and what the monthly levy obligation of owners are.

Hanekom’s advice is: “It’s best to check first so that there isn’t time wasted on a scheme that may only look good on the surface.”

Last modified on Monday, 30 October 2017 21:29

Most Popular

Mixed-use Loftus Park in Pretoria opens its vibrant first phase

Mar 29, 2018
Pieter Strydom
The first phase of Loftus Park opened in Pretoria today introducing some 34 000m2 of…

Development update: Fortress Income Fund Limited welcomes Makro to Cornubia Ridge

Mar 27, 2018
Fortress Income Fund CEO Mark Stevens
Fortress welcomes Makro to Cornubia Ridge.

Flat rentals outperform inflation – Rode Report

Mar 29, 2018
Kobus Lamprecht
Amidst serious political turmoil, the South African property market ended 2017 on a…

SA Home Loans strengthening entrepreneurship in South Africa

Apr 11, 2018
184 image
Successful entrepreneur Nonku Ntshona, addressed entrepreneurs who are participating in…

Property demand and values increasingly impacted by commute times

Mar 28, 2018
Andrew Golding
As our roads seem to get busier every year, people are seeking ways of reducing their…

Please publish modules in offcanvas position.