‘Special Levies – by Johan Barkhuizen, candidate attorney, Coenraad Kukkuk Attorneys – 27.11.2017
Raising a special levy
Both the Sectional Titles Act and the prescribed rules leave the decision to raise a special levy to the sole discretion of the trustees. The Act says a special contribution, “becomes due on the passing of a resolution in this regard by the trustees” and the rule says “The trustees may . . . make special levies upon the owners”. It would be possible for owners to agree to fund an expense that they as a body must approve – such as an improvement to the common property – by special levy, but ordinarily owners don’t have a say, they must just pay.
Two requirements for trustees’ raising a special levy
The legislation does however make the trustees’ power to raise a special levy conditional on two requirements. The first is that the special levy must be necessary and the second is that a special levy cannot be raised to pay an expense that was already included in the budget approved at the last AGM. Necessary means that a special levy can’t be raised for an expense that can wait for inclusion in the budget for the next financial year. The budget restraint means that a special levy can’t be used, for example, to pay a maintenance expense because maintenance must be included in the budget. Special levies are basically for emergencies.
The liability provisions for paying a special levy are slightly different to the provisions that govern the liability for the ordinary levy. The persons who are the registered owners of units in the scheme on the date the trustees raise the levy, whether it is the annual levy or a special levy, are liable to pay that levy. However, when a unit is transferred, the liability for the annual levy shifts pro-rata from the person who was owner at the time of the trustees’ resolution to the new owner.
The same is not true for the liability for a special levy, though. If a special levy is running at the time a unit is sold, the selling owner must complete the payment of the special levy before transfer of the unit to the new owner. An alternative could be an arrangement in the sale agreement that accommodates payment of the special levy. And the body corporate must be happy with the arrangement because that is a condition for the issue of a levy clearance certificate.
Disputes Once Levy Has Been Set:
Certain clauses in the Sectional Title Act as it now stands make it clear that no owner can dispute the amount of the levy once it has been decided on by the trustees. A new amendment, however, is likely to give owners more say here and, provided a quorum is achieved at the members’ meeting, may make them able to veto a special levy. [My emphasis]
Any owner who believes that a special levy was raised irregularly would be well advised not to react by withholding payment as this can only result in his paying additional expenses such as collection commission, interest and legal costs. [My emphasis]
A special levy is different in that it does not require the input or approval of all the owners in the scheme but only that of the board of trustees. The trustees can decide at any time that a special levy is required and they can make the decision at a normal trustee meeting, it doesn’t require a general meeting or any other meeting. It is always advisable that the trustees prepare and sign a suitable resolution to confirm the decision taken to raise the special levy.
A special levy may only be raised for unforeseen expenses for which the body corporate has not made provision for in its annual budget. The special levy must be necessary and cannot be raised to inflate the coffers of the body corporate. When informing the owners of the special levy, the trustees must indicate how much the special levy will be and for what the special levy will be used. It must be noted that a special levy cannot be raised and used for expenses which have already been budgeted for in the budget of the body corporate. The trustees may decide over how long a period the owners may pay their special levy contributions, i.e. as a lump sum or over a longer period of time.
However, it would thus seem that since no special resolution is required to raise a special levy, that no special resolution would be required to undo same. The Courts however, need to still confirm this.
– Johan Barkhuizen