Advice and Opinion

Legalities of collecting special levies

In ideal situations the normal levies collected in a sectional title scheme will cover all the operating expenses as well as any larger maintenance or repair projects that are due, but cases do arise when the body corporate will need to raise a special levy and Prescribed Management Rule 31(4B) allows for this, says Michael Bauer, general manager of the property management company IHFM.

Special levies are usually raised for unbudgeted expenses or repairs that have become necessary immediately and raising these levies do not need the approval of all the body corporate members, but must have a resolution passed by the trustees which must be minuted (as per section 37 (2) and 37 (2)(b) of the ST Act).

The rule states: “The trustees may from time to time, when necessary, make special levies upon the owners or call upon them to make special contributions in respect of all such expenses as are mentioned in rule 31(1) above (which are not included in any estimates as are mentioned in rule 31(2) above), and such levies and contributions may be made payable in one sum or by such instalments and at such time or times as the trustees shall think fit.”

The expenses referred to in rule 31 (1) are those which are mentioned in section 37 (1) of the ST Act, which says that the owners must pay levies in proportion to the size of the unit they own, i.e. the participation quota, and special levies are calculated in the same manner, said Bauer.

In many cases where the trustees decide to raise a special levy, the owners might challenge whether this is absolutely necessary and whether the project cannot wait until the following year where the expense can be added to the budget at the next AGM but often the job will then be delayed further as many will not want a sharp increase in levies, so it ends in a catch-22 situation, said Bauer.
To delay projects goes against PMR 36 (2), which states that the estimate of expenses for the year: “shall include a reasonable provision for contingencies and the maintenance of the common property”. This rule supports the requirement in section 37(1)(a) that, when determining contributions, the trustees must take a long-term view of the scheme’s likely expenses.

“While it is understandable that members of a sectional title scheme might go against large special levy contributions as many have limited budgets that they must stick to each month, it must also be remembered that the trustees usually act in the scheme’s best interests to maintain the value of the property owned and would not generally add unnecessary items to the amounts that have to be paid for,” said Bauer.