By Pearl Scheltema, CEO, Fitzanne Estates
The Sectional Titles Schemes Management Act mandates that a Body Corporate collect payments (levies) from all members of the body corporate (i.e., all members of sections in the scheme) to meet the scheme’s common expenses and running costs for a particular financial year. Contributions are distributed among members based on the Participation Quota (PQ) of the section they hold, which is calculated by dividing the floor area of their section by the total floor area of the scheme.
Now that we’ve covered the basics of the requirement for contributions and how these payments are allocated among members, let’s take a look at a few methods that members might keep levies as low as possible.
Becoming a Scheme Executive
Serving as a Scheme Executive and participating in the scheme’s yearly budgeting processes is the greatest method to guarantee that levies are kept as low as possible. It’s crucial to understand that budgeted line items are decided by the Scheme Executives, not the Managing Agent. This is significant because it means that the Scheme Executives may choose services providers such as auditors, security agencies, garden services, and maintenance contractors whose fees fit into the scheme’s budget.
A few improvements to these types of expenses can save the Body Corporate hundreds of Rands every month, lowering the contributions due by each body corporate member.
Reviewing the Annual Budget and Financial Statements
Another strategy to keep levy contributions low is to thoroughly review the budget and Annual Financial Statements submitted by the Auditor prior to the AGM before just endorsing them. Looking at the scheme’s audit report may highlight high expenses and prompt the Scheme Executives to look for more cost-effective alternatives. This will help the Scheme Executives modify costs for the next financial year by ensuring that the scheme’s funds are carefully handled.
Scheme Executive Training
To manage a scheme effectively and legally, the Scheme Executives need to be familiar with the Sectional Titles Schemes Management Act (“the STSM Act”), as well as the scheme’s Management and Conduct Rules. You should also be familiar with the Community Schemes Ombud Service Act’s provisions on dispute resolution, the Community Schemes Ombud Service “the CSOS” contribution, and the CSOS regulations on Scheme Executives responsibilities and fidelity insurance.
There are a host of other legislation you should be knowledgeable about, some of it in detail, such as the POPI Act, the new Property Practitioners Act, local municipal by-laws, and occupational health and safety and labour legislation. Scheme Executive Training will ensure that new Scheme Executives are knowledgeable about these topics, as well as offer valuable training on financial management within a Sectional Title Scheme. Increased knowledge on the financial management of a scheme will assist Scheme Executives in understanding the financial reports and allow them to make informed decisions related to the financial management of the scheme.
More about Fitzanne Estates
Fitzanne Estates (Pty) Ltd is a Property Management Company that can sufficiently administer your property investment to the benefit of the Landlord, the Body Corporate, and the NPC – Non-Profit Company. Services include Letting, Sectional Title Management, Full Title Management (NPC – Non-Profit Company) and Sales.
LinkedIn: Fitzanne Estates
YouTube: Fitzanne Estates
Podcast: Fitzanne’s Property Exchange
This article first appeared here.
Image by Canva.