The levy leaves your account at the start of every month and you know the amount to the cent. Ask most owners what it pays for and the room goes quiet.
It is one of the questions we hear most often from sectional title owners in the schemes we manage. The answer is simpler than most people expect. The scheme has already told you. It told you at the last AGM.
Where your levy goes
Every sectional title scheme runs on two funds. Section 3 of the Sectional Titles Schemes Management Act 8 of 2011 (STMA) requires a body corporate to keep an administrative fund for the running costs of the scheme and a reserve fund for the larger maintenance and repair work that comes around less often.
The administrative fund covers day-to-day costs that keep the building running optimally such as insurance, the upkeep of the common property, water and electricity in the shared areas, security and cleaning, and the managing agent fee.
The reserve fund is the money put aside so that a new roof or a lift overhaul does not arrive as a nasty surprise in the form of a special levy.
Your share of both is set by your participation quota. That is the figure that decides your portion of the common property and your portion of the costs that come with it.
Who decides the number
The trustees draw up a budget for the year ahead. The owners then see it and vote on it at the AGM.
This is the part most owners miss. Your levy is not set somewhere you cannot see. It is set in a room you are invited into every single year.
Why the AGM is the answer
When an owner asks us what their levy pays for, our advice is always the same. Go to the AGM and apply your mind to the expenses before you vote on them.
Read the budget line by line before the meeting. Compare what was spent last year with what was budgeted. Ask why a line has grown. Ask what the reserve fund is being saved for and whether it will be enough when that day comes.
An owner who does this once, rarely needs to ask the question again.
When the numbers still do not add up
Sometimes an owner reads the figures and still has a real dispute about a levy. Raise it with the trustees first and in writing. If it cannot be settled within the scheme the Community Schemes Ombud Service is the body set up to hear sectional title and HOA disputes.
Before your next AGM
AGMs across the schemes we manage are wrapping up before the end of the year. If yours is still to come this is the week to open the budget pack rather than leave it in your inbox.
What is the one line on your scheme's budget you have never quite understood?
How our community schemes team supports trustees and owners through the budget and the AGM is set out on our website.
