Advice and Opinion

Follow all necessary processes when making levy adjustments

In April 2013 Prescribed Management Rule 31 (4A) was revoked which allowed trustees to increase the contribution due by the owners of units in sectional title schemes by a maximum of 10%, says Chinelle Birk, credit manager at Propell.

This rule was then replaced with 31 (4B) only allowing trustees from time to time, when necessary, to call for special levies from the owners or call upon them to make special contributions in respect of all expenses as mentioned in rule 31 (1) and these levies and contributions are payable in one sum or by such installments and such time or times as the trustees think fit, she said.

With the above mentioned amendment it is necessary that the budget for the financial year be approved at an annual general meeting before any levy adjustment can be implemented.

A resolution signed by the trustees will also be required as per rule 37 (2) of the Sectional Titles Act, which states that the liability for contributions accrues from the passing of a resolution to that effect by the trustees of the body corporate. If there is no signed resolution there is no legal way of collecting the levies, said Birk, and if any dispute in levies had to go to arbitration or to court this is the first thing that would be called for.

The following documentation is needed when implementing any levy adjustment:

The AGM minutes, where the budget was approved;
Approved budget;
A resolution signed by the trustees; and
The levy schedule, reflecting the new levy per unit that needs to be implemented.

Likewise, to implement a special levy, certain documentation is also needed:

A resolution signed by the trustees; and
The special levy schedule of the amounts per unit that needs to be collected.

It is important to note that if a resolution is signed via round robin, the signatures of all the trustees appointed at the AGM are needed. However, if a trustee has resigned since his/her appointment at the AGM the resignation letter can accompany the resolution, she said.

A resolution can also be signed by the majority of the trustees if signed at a trustee meeting and the minutes of the specific trustee meeting should accompany the resolution.

“While all these processes might seem onerous, if the steps aren’t followed as they should be and an owner defaults on his levies, there is no legal way of claiming the outstanding amounts from him. This is why it is important for trustees never to take shortcuts in the preparation of their financial documents and the follow up resolutions and schedules,” said Birk.

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