Special Levies Confusion Clarified

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15 Jan 2013

The changes made to the Prescribed Management Rules for sectional title schemes in October last year have caused some confusion. 

Currently, the trustees can still raise a special levy according to section 37 (2a and 2b), says Bauer, so the perception that it is not allowed is not true.

This is according to says Michael Bauer, general manager of sectional title management company, IHFM, who explains that Prescribed Management Rule 31 (4) was deleted but the deletion was made in error and this rule is going be reinstated once the Sectional Title Schemes Management Act comes into operation.  Until such time, the provisions of PMR 31 (4) do not apply. PMR 31 (4) allowed the trustees to raise a special levy only for expenses that were necessary and were not budgeted for in the current levy budget. 

Currently, the trustees can still raise a special levy according to section 37 (2a and 2b), says Bauer, so the perception that it is not allowed is not true. The only requirement to be able to do this is that is it is raised for an expense as listed in section 37 (2a) and, of course, it must be deemed as necessary and it must be paid before it can be added to the new year’s budget. 

“Nothing has changed with regards to raising special levies. Every body corporate will from time to time need to raise equity in some way or another for major repairs to a building.  Because they cannot borrow money from banks, the only way to raise the shortfall on their operating expenses is to raise a special levy.” 

The budget of a sectional title scheme relies heavily on the members paying their levies on time, this would ensure the smooth running of the financials but the reality is that many do not pay on time and some do not pay at all, says Bauer. "There isn’t always money in a float or in holding to pay for unforeseen large expenses, so this way of raising funds is the only way possible.” 

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