For most ST unit owners, the financial aspects of managing the whole scheme can be confounding unless you have some accounting experience. It is an area fraught with defaulting levies, inexplicable municipal bills and legal complications, best dealt with by an experienced managing agent (MA). However, as pointed out by Andrew Schaefer, MD of leading property management company Trafalgar*, owners do have a responsibility to understand what is involved and be participants at the annual general meetings, where they can ask questions and be better informed.
Q1: Who is responsible within a ST scheme to ensure levy payments are made and received timeously?
It is usually a MA's duty to collect levies. When Trafalgar is the MA, we ask the Trustees to assist us with this process by signing a Levy Resolution as required by the Sectional Titles Schemes Management Act (STSMA) to make levies legal and binding on the owners, and we also ask them to sign an Interest Resolution stating what percentage of interest the MA is supposed to charge on arrear levies. This interest goes to the Body Corporate.
The MA should also ask the Trustees to sign a Handover Resolution that states at what stage arrear accounts should be handed over to attorneys or the Community Schemes Ombud Service (CSOS) for collection. The MA (when registered with the Council for Debt Collectors) is entitled to require the owner who falls into arrears to pay certain administrative charges associated with the collection process. These are prescribed by the Council.
Q2: If levies are unpaid, how are the owners held accountable, and what is the legal route to follow?
If the levy account remains unpaid (and in accordance with the Handover Resolution) the accounts can be handed over to attorneys for collection. However, the CSOS is also very effective as an avenue for debt collection. The owner remains liable for all costs involved in the collection process.
Q3: Why should owners always check their levy statements carefully, and what would be a cause for alarm?
Firstly, it is the owners’ responsibility to ensure that they always receive their levy statements. Not receiving these is not an excuse for non-payment. Most levies are payable monthly, so there should be a monthly levy statement sent. It is important to check that all payments made are reflected on the statements and that no extra charges are raised on the account without the owner’s consent. (Levies are raised based on the approval of the annual budget, and interest and collection charges will be raised on arrear levies, but there should be no other charges that the owner did not agree to.)
Q4: What course of action should a unit owner follow if they find something untoward on their levy statement?
If a MA is dealing with the collection of levies and it is the issuer of the levy statement, it is best to contact them directly. On Trafalgar levy statements, for example, we add the details of the Client Account Administrator that deals with the levy accounts.
Q5: Why is it important for all owners to attend the annual general meeting (AGM), and how long should they be given to review the financials?
The AGM is an opportunity for owners to ask questions and ensure that the Body Corporate (BC) is run efficiently. The unit you own is your investment, so get involved!
At the AGM important decisions are taken that you should have your say in, such as approving the budget for the next financial year and determining the levies payable, and also the election of Trustees. The Trustees are essentially the committee that will manage your BC, and you want to ensure you have trustworthy and knowledgeable people in this position. If you don’t attend the AGM, you have no say in these matters. The notice of the AGM - including the financials and other relevant documents - should be sent to the owners at least 14 days before the meeting, giving sufficient time to study these.
Q6: What would be red flags in terms of reading financials?
Owners should look at the budget items and compare those to the previous financial year; big variances should raise a red flag. There could also be instances where the auditor qualifies the audit for some reason and places an emphasis on some issues. This is a red flag. And, of course, it is also a red flag if the BC is running in a deficit. All these things should be queried and explained to the owners.
• Is the MA expected to attend the AGM, and for what reason? There is no legal requirement for the MA to attend the AGM, but at Trafalgar we certainly prefer to do so in order to assist the Chairperson and the Trustees in running the meeting correctly. This includes things like determining if there is a quorum (a percentage of owners that will enable a vote) and assisting with the order and voting process.
Some MAs, like Trafalgar, have an online voting system. Ours is called Unimeet, which makes this efficient and easy. We also assist the Trustees by taking the minutes of the meeting and compiling and attending to the action log of items arising from the AGM.
Q7: What are special levies, and how should the Trustees deal with advising the BC?
In terms of the STSMA, the Trustees have the right to raise special levies. These are levies collected over and above the normal levies of the BC as determined at the AGM. The Trustees need to pass a resolution (majority vote) before starting to raise the special levies, after which the MA usually notifies the owners.
It is important to note that a special levy can only be raised for unforeseen, unbudgeted expenses, and there should always be a defined period specified for the special levy. For example, every unit is to pay their share of the unforeseen expense monthly from 1 August to 1 December 2025.
It is also strongly recommended that the owners be notified of the exact reason for the special levy and that these payments should not just be absorbed into BC funds but actually ring-fenced for that specific purpose.
Must all owners contribute to a special levy if a quorum agrees, and what if one or two owners refuse to pay these?
Trustees don’t need permission from the owners to raise a special levy; they have the right to do this as per the STSMA. After passing a Special Levy Resolution, it is binding on all owners, and they cannot refuse to pay it.
Should any owner have questions/ doubts about the special levy, they should get the backing of at least 25% of the owners (per participation quotas) and request the Trustees to call a Special General Meeting to discuss the matter and explain their reasons for the special levy.
*Trafalgar currently has more than 90 000 residential properties worth more than R100-billion under management in more than 1 400 community housing schemes in SA.
