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What is the best way to calculate ST levies?

07 Aug 2015

There is an ongoing debate in the sectional title industry concerning whether levy contributions should be worked out upfront, i.e. a set cost, or whether it should be the participation quota (PQ) method, which is according to the floor space of the unit inhabited.

“The PQ way of working out levies is usually the most objective and the fairest. If the standards and rules are set upfront it is better for the management of the scheme and consistency in the collection of monies due,” says Bauer.

This is according to Michael Bauer, general manager of IHFM, the property management company, who says many ask whether the PQ factor is actually fair, or whether levies should be charged per service or per owner.

He says there are certain items in a building that could be charged per unit, but costs such as insurance, for instance, have to be on a value of the unit. If you had to insure a one bedroom, one bathroom unit, it will cost a lot less than the three bedroom two bathroom penthouse in the same building, says Bauer.

The benefit of uniformity, where everyone pays the same amount, is that there are no debates as to what is paid and everyone knows upfront that it is a certain cost split equally among owners.

“Fairness, in my view, is in knowing upfront what you will be paying each month,’ says Bauer. “Whichever method is chosen, however, should be consistent.”

In South Africa, the Sectional Titles Act rules that the participation quota method is used to determine levies, but it does make allowance for changes, under section 32 (4), in the way the quota is worked out. 

If owners do want the way levies are worked out to be changed, the body corporate must determine whether there is a fairer way of determining the levies, and then before implementing the new payment system, it must have a special resolution, the written consent of all the owners and have the new rule filed with the Registrar of Deeds. 

Only after this is done can the levy amounts or quotas be changed to the new system proposed, says Bauer. 

“The PQ way of working out levies is usually the most objective and the fairest. If the standards and rules are set upfront it is better for the management of the scheme and consistency in the collection of monies due.”
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