Levies on an equal 'per owner' basis

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13 Feb 2013

Over many years of giving sectional title advice, I have seen a persistent theme of schemes charging levies on an equal "pro rata" basis, either for all expenses or for specified ones.

All common expenses, whether “special" or not, and whether they relate to “improvements" or not, must be recovered from owners in accordance with their participation quotas.

There are other strata title and condominium jurisdictions in which the default for recovery of scheme expenses is that each owner is charged the same amount, so we must accept that this is often seen as being “fair". Whereas the Australian jurisdictions from which we copied our early sectional titles statutes initially charged levies on the basis of the measured area of sections, this principle was shortly thereafter changed to one in which communal expenses are shared on the basis of the valuation of the various units in the scheme. So a third apparently “fair" system of sharing is to base levies on the value of each owner's investment in the scheme.

There is no one particular basis (measured floor area, equality or value) that is objectively “fairest". The Sectional Titles Act, No. 86 of 1986, provides that the default manner in which common expenses must be recovered from owners is in accordance with the participation quotas allocated to the sections they own. The only circumstances in which the scheme is entitled to depart from this expense–sharing formula is in accordance with a rule made under subsection 32 (4) of that Act, which allows for the modification of the effects of the participation quotas in specified regards.

What does all this mean in practice? All common expenses, whether “special" or not, and whether they relate to “improvements" or not, must be recovered from owners in accordance with their participation quotas.

When, for whatever reason, the body corporate decides that it would be more equitable for a specific type of expense to be recovered from owners on another basis, before implementing this alternative basis, it must:

(a)    make a rule under subsection 32 (4) of the Act, which requires a special resolution;

(b)    obtain the written consent of all owners who are negatively affected by that rule; and 

(c)    have the rule filed at the offices of the Registrar of Deeds.

Only then is the body corporate entitled, in accordance with that rule, to collect levies other than in accordance with the participation quotas. - Graham Paddock 

Professor Graham Paddock, is an authority on sectional title and HOA law and practice and is the head of Paddocks. For more information visit www.Paddocks.co.za.  

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