Property Levies

What should your monthly levies cost you?

November 3, 2017 in Property Levies

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.

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, 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, Hanekom says 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 buildings’ 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 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.

Source: Property24

What Happens When Levies Aren’t Paid

July 16, 2014 in Property Levies

levies 1Owners of units in sectional title schemes who do not pay their levies place an unacceptable burden on the other members of the scheme, and in some cases the trustees even have to resort to raising a special levy to cover the body corporate’s ongoing financial obligations, says Mandi Hanekom, operations manager of Propell.

 

Because defaulters are unlikely to contribute to the special levy, they create an even greater financial burden for the other members, she said.

Sometimes, the case of non-payment is due to lack of finances and in these cases, said Hanekom, it is advisable for those who cannot afford to live in the complex to sell as soon as they can, rather than wait for the case to get to the extreme of having the assets attached or the house sold in execution.

Trustees should keep in mind that when they hand an account over to attorneys for collection, that it will not be paid immediately and will definitely incur further costs.

To collect levy arrears efficiently, it is vital that the trustees appoint an attorney who is experienced in sectional title matters and understands the Sectional Titles Act. Collection of levies is not an easy task, said Hanekom, and it is a good idea to involve collection experts as early as possible and they must be given all the backing documentation to execute the collection process efficiently.

The documents that will be needed by the attorneys are: the participation quota schedule, a copy of the approved budget, the last AGM minutes, the levies schedule, the trustees’ resolution in terms of which the levies were determined, and a general ledger account of the defaulting owner, showing what is owed.

In all cases where levies are in arrears for some time and get handed over for collection, there are numerous lengthy processes to go through, and trustees must be aware of the time it will take to collect outstanding amounts, so that they can have a contingency plan in their budgets for situations such as these.

The target of the attorneys who handle the collections will always be to collect as much of the monies owed in the shortest time possible, and it is hoped that the owner who is in arrears will respond once the pre-legal process notification is sent to them, said Hanekom.

The process that collection attorney Propell uses starts with a notice being issued when the amount owed exceeds R150. Once the amounts owed exceed R1 000, it becomes more serious and a letter of demand will be sent to them, but once the overdue balance is over R3 000, action must be taken, said Hanekom, which entails summons being served against the debtor. The owner must either defend his case or judgment will be granted against the debtor, thus also leading to blacklisting.

There are various ways of recovering costs. For example, a warrant of execution against movable property could be granted, in which case the Sheriff of the Court will determine and write up the moveable assets that can be removed for sale at auction. If there are no attachable assets, or the Sheriff could not find the owner, it needs to be decided whether to trace the owner and what to do next.

With some cases, there are various options: if the owner has equity in property, how many properties he owns, and his salary and employment situation. It will then be determined whether or not a garnishee order should be pursued, whether to apply for the rental income to be attached, or whether to apply for the unit itself to be sold in execution, said Hanekom.

As a drastic step of action, the debtor can also be sequestrated or liquidated.

“From the start of the collection process to the body corporate receiving money, up to three years could have passed, and the trustees will have had to make plans to cover these amounts in the meantime. The quicker the matter can be dealt with, the quicker the body corporate receives the monies owed, so it is of utmost importance that the trustees have their ducks in a row in terms of resolutions, minutes, financial records and so on, so that the attorneys can get on with the job of collecting the outstanding amounts,” she said.

SOURCE: www.propertytribe.co.za