For many sectional title owners, few words generate more concern than hearing “special levy” mentioned during an Annual General Meeting (AGM) relating to their property complex. Unlike ordinary monthly levies, special levies often arise unexpectedly and can place significant financial pressure on owners.
When a body corporate announces a special levy, owners frequently ask the same questions:
Understanding how special levies work and the rights and obligations of owners is essential for anyone living in or managing a sectional title scheme.
Although special levies are the last additional expense any property owner wants to have to fork-out additional funds for, it’s also good to consider the fact that most special levies are implemented for the good of the sectional title scheme in the medium-to-long term, and that if not implemented to provide funding for corrective action, the long-term value of properties could suffer if the required work is not completed.
A special levy is an additional contribution raised by a body corporate of a sectional title scheme to fund a necessary expense that was not included, or expected, in the scheme's approved budget for a financial year. Most importantly, a special levy is implemented to cover the costs of work required, which was unforeseen and cannot reasonably be delayed until the next financial year.
Unlike ordinary levies, which are budgeted annually and approved as part of the scheme's financial planning process, special levies are intended to address unforeseen or urgent financial needs.
Examples may include:
IMPORTANT: Special levies are not intended to replace proper budgeting or compensate for poor financial planning. They are generally designed to address necessary expenses that arise unexpectedly.
Special levies are governed by the Sectional Titles Schemes Management Act 8 of 2011 ("STSMA") and the Prescribed Management Rules ("PMRs").
In terms of Prescribed Management Rule 21(3)(a), trustees may raise a special levy when additional income is required to meet a necessary expense that cannot be covered by current financial funds available, and the work cannot reasonably be delayed until provision can be made in the next annual budget.
This means that special levies are not automatically subject to owner approval and may, in appropriate circumstances, be authorised by trustees through a valid trustee resolution.
In many cases, yes.
One of the most misunderstood aspects of sectional title governance is that trustees generally have the authority to raise special levies without first obtaining approval from owners at a general meeting.
However, this authority is not unlimited.
Trustees must be able to demonstrate that:
If these requirements are not met, the validity of the special levy may be questioned.
As a side note, this aspect also emphasises the importance of the role of trustees within a sectional title management scheme - competence is a standout trait trustees are expected to have as part of their management role within the sectional title scheme.
Since 2016, sectional title schemes have been legally required to maintain reserve funds for future maintenance, repair, and replacement of common property.
By law, a sectional title scheme’s reserve fund must be valued at a minimum of 25% of the scheme’s total administrative budget. The purpose of reserve funds is to reduce the need for unexpected special levies and promote long-term financial stability within schemes. Hence, the importance of the reserve fund (and having a 10-year Maintenance Plan in place).
However, even well-managed schemes may encounter unexpected expenses that exceed available reserve funds or arise suddenly without warning. In these circumstances, a special levy may still be necessary.
Generally, no.
Once a special levy has been validly raised in accordance with the STSMA and the scheme's rules, owners are legally obliged to pay the special levy as laid out in terms of the amount and the period during which the special levy will be enforced for (example: 6 months).
REMEMBER: Although a special levy is an additional, unforeseen (and unwanted) expense imposed, the intention is for the betterment of the scheme in the medium-to-long term, with the alternative being problems which can result in the degradation of the scheme, with property values following a downward trend.
Importantly, an owner cannot simply withhold payment because they disagree with:
Failure to pay a valid special levy may result in the same recovery procedures that apply to ordinary levy arrears, including legal action, interest charges, and recovery costs.
Yes.
Although owners are generally required to pay validly imposed special levies, they are not without remedies.
A special levy may potentially be challenged where:
Depending on the circumstances, disputes may be referred to the Community Schemes Ombud Service (CSOS) or, where appropriate, the courts.
However, owners should obtain legal advice before withholding payment, as refusing to pay a valid levy, even a special levy, can have significant consequences. It is best to pay the special levy.
Special levies can create complications when a property is transferred during a sale.
Unlike ordinary levies, special levy liability is often linked to the owner who was registered as owner when the trustees passed the resolution imposing the levy. In many instances, the seller remains responsible for payment of the special levy unless an alternative arrangement is agreed between the parties and accepted by the body corporate.
Buyers and sellers should therefore ensure that any outstanding special levies are properly addressed during the conveyancing process.
For Trustees:
For Owners:
Open communication and sound governance often prevent disputes before they arise.
Can a body corporate raise a special levy for planned maintenance?
Generally, no. Planned maintenance should ordinarily be budgeted for and included in the annual budget and reserve fund planning. This is the reason for requiring a 10-Year Maintenance Plan, as this provides transparency and an opportunity to cost maintenance requirements for years to come.
Special levies are intended for necessary expenses that cannot reasonably be delayed, and which came about due to unforeseen circumstances.
Not necessarily. Trustees may authorise certain special levies by trustee resolution if the legal requirements are met. However, transparency in terms of the the reasons for implementation of the special levy are highly recommended in order to provide clarity as to why the additional levy is urgently required.
The body corporate may recover the outstanding amount through legal enforcement processes, which usually include interest being added to non-paid special levies, as well as recovery costs (i.e. legal fees) being passed to the property owner who hasn’t paid.
Remember: A special levy follows the same guidelines as a standard levy, and hence is required to be paid for the betterment of the sectional title scheme as a whole.
Yes. Depending on the circumstances, disputes relating to sectional title governance and levies may be referred to CSOS for dispute resolution.
As part of our Sectional Title Legal Services our team here at EW Serfontein & Associates Inc. regularly provide advice to bodies corporate, trustees, managing agents, and owners on sectional title governance issues, including levy disputes, debt recovery, special levies, and compliance with the Sectional Titles Schemes Management Act.
Whether you are seeking to recover unpaid levies as a property owner or landlord, challenging an unlawful levy as a tenant, or want to ensure that your scheme remains compliant as a party with a vested interest in the scheme (i.e. property owner, tenant or trustee), our conveyancing team are well versed in providing practical legal guidance tailored to your circumstances.
Special levies are an important financial tool that allows bodies corporate to address urgent and unforeseen expenses. However, trustees must exercise this power responsibly and within the framework established by the Sectional Titles Schemes Management Act (STSMA).
For owners, understanding when a special levy is lawful, and when it may be challenged, is essential to protecting both their rights and their investment. There is nothing wrong with querying the reasoning and basis for the implementation of a special levy, especially if ample explanation has not been provided.
When disputes arise, obtaining timely legal advice can help ensure that matters are resolved efficiently and in accordance with the law. Our offices are always available for guidance on these matters, and more.
Do you have a questions on the topic of special levies or a topic regarding your property within a sectional title scheme? Please get in touch with us today.
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This article is not intended to constitute any form of financial or legal advice.
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You might also be interested in reading one of our recent articles, Sectional Title Levies - How Are They Calculated And Enforced?
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