Compiled by Monique Oosthuizen
You have opened your levy statement this month and, to your dismay, noticed that the levy fee has increased. Scanning through the line items, you notice the following:
“Reserve fund levy”
So, what do these amounts mean?
“CSOS levy” is the monthly fee payable quarterly in advance to the Community Schemes Ombud Service (CSOS), an act which came into effect on 7 October 2016. It is calculated as follows:
Current monthly levy, minus R500 x 2%, capped at R40 per unit per month and limited to R2500
CSOS levy is utilised for the provision, made by CSOS, of the service as an independent regulator with regards to dispute resolution. This is less formal, less costly and less time consuming than the courts. CSOS also addresses the promotion of good governance and education of the consumer in the community scheme sphere (CSOS, 2017).
“Monthly levy” is the levy payable by an owner to the community scheme as a contribution towards the administrative fund of the scheme, thus to cover the estimated annual operating costs. The different components of the administrative fund are set out in the new Sectional Title Schemes Management Act (STSMA), which too came into effect on 7 October 2016, as follows:
- For the repair, maintenance, management and administration of the common property.
- For the payment of rates and taxes and other local municipality charges for the supply of electricity, gas, water, fuel and sanitary or other services to the buildings or land.
- For the payment of insurance premiums relating to the buildings or land.
- For the discharge of any duty or fulfilment of any other obligation of the body corporate.
“Reserve fund levy” is the separate levy relating to the maintenance, repair and the replacement plan for the common property. These are amounts that are reasonably sufficient to cover the cost of future maintenance and repair of the common property and may not be less than the amounts prescribed by the minister.
The provision made for reserve fund levies will eventually cause the special levy to fall away. A special levy was raised for emergency or unforeseen expenditure that could not be reasonably delayed until provided for in the budget for the next financial year and these were normally payable in one lump sum or in instalments as determined by a trustee resolution.
The minimum level for this reserve fund has been set at 25% of the previous financial year’s administrative fund (the fund for operating costs) levies. If your scheme is short of this requirement due to relying on special levies to fund exceptional expenses in the past, your levies will increase by at least 15%, in addition to any normal annual increase, until you catch up (Sectional Title Schemes: New Reserve Fund Requirement and Other Key Changes, n.d.).
It is important to note that reserve fund levies are only applicable to sectional title scheme complexes created by the Sectional Titles Act and falling within the ambit of the new STSMA. The new STSMA & CSOS Act brought along quite a few changes and expenses – for a better future, we hope!
CSOS. (2017). Frequntly asked questions. Retrieved from Community Schemes Ombud Service: http://www.csos.org.za/faq.html
Miltons Matsemela Attorneys. (n.d.). Sectional Title Schemes: New Reserve Fund Requirement and Other Key Changes. Retrieved from Miltons Matsimela Attorneys: https://www.miltons.law.za/sectional-title-schemes-new-reserve-fund-requirement-and-other-key-changes/