Levy increases invariably happen annually, and only after passing a resolution presented at the annual general meeting (AGM) of the complex concerned. This increase allows the body corporate (owners of units) to attend to the maintenance, management and repair of common property, and is usually applied monthly, at the start of the financial year.
Khairiyah Safeda, Founding Director of Safeda & Associates, Attorney, Notary and Conveyancer provides clarity on the process involved.
Timing and Discussion of Levy Increases
“Levy increases should be discussed at the Annual General Meeting (AGM). According to Section 3 of the Sectional Titles Schemes Management Act (STSMA), the trustees must pass a resolution to increase levies. The quorum (number of owners in attendance) for an
AGM is calculated based on the participation quota value (PQ) of each section in the scheme:
- For schemes with four or fewer sections (units), a quorum of 66.66% is required.
- For schemes with more than four sections (units), a quorum of 33.33% is needed.
Guidelines for Levy Increases
“There are no strict legal guidelines on how much a levy should be increased annually. The increase is typically based on the Body Corporate’s budgetary needs, which should consider maintenance, repairs, and other operational costs.
According to prescribed management Rule 21 of the STSMA, levy increases are limited to a maximum of 10% at the end of a financial year to account for anticipated increased liabilities.”
Disputes on Levy Increases
“If there is a dispute regarding the levy increase, owners can raise their concerns at the AGM or a Special General Meeting (SGM). The internal dispute resolution process, if provided by the Management and Conduct Rules, should be followed. If unresolved, the matter can be referred to the Community Schemes Ombud Service (CSOS) for resolution. It’s important for the Body Corporate to ensure transparency and provide detailed explanations for the increases to avoid disputes.”
Application of Levy Increase
“The levy increase should be applied from the beginning of the financial year, as stated in the Body Corporate’s rules. For instance, if the financial year starts in March, the levy increase would take effect in March. Alternatively, a levy increase can be applied at the AGM.”
Notification to Owners
“Prescribed Management Rule 25 of the STSMA requires that all owners be notified of the levy increase within 14 days after the AGM. The notice must include the amount to be paid, the due date, and the interest rate payable, among other details. While the minutes of the AGM are essential, it is good practice to send additional notifications through emails, physical notices, or official letters, ideally at least 30 days before the increase takes effect. This additional communication helps ensure that all owners are properly informed.”
Communication to Tenants
“Owners of rental units should inform their tenants of any rent increase due to a levy increase, as specified in the rental agreement. Ideally, the lease should include a clause allowing the landlord to adjust the rent if levies increase. Tenants should be given sufficient notice, usually 30 to 60 days, as per the terms of the lease agreement.”
Unawareness of Levy Increase
“If owners claim they were unaware of the levy increase and fall into arrears, the Body Corporate should provide evidence of the notifications sent. Legal precedent emphasises the importance of proper communication. Owners are responsible for staying informed about decisions made at AGMs. If due diligence in notification was followed, the claim of unawareness is unlikely to hold in a legal dispute. The scheme can then initiate legal proceedings to collect the outstanding debt.”
Final Warnings and Advice
“It is crucial for the Body Corporate to maintain transparency and open communication with all owners. Regular updates, clear notices, and accessible meeting minutes are vital. Owners should make it a habit to attend AGMs or review meeting minutes thoroughly to stay informed. Ensuring everyone understands the reasons for levy increases can help mitigate disputes and ensure smoother community management.”
