It is often better to adjust the levies in a sectional title scheme before the Annual General Meeting (AGM), according to an expert.
Michael Bauer, general manager of IHFM, says many people might not be aware that since November 2008, according to Annexure 8, Management Rule 31 (4A) of the Sectional Title Act, the trustees of bodies corporate have been allowed to implement a new budget and levies from the beginning of the financial year and not wait for the AGM to be held.
The increase must not exceed 10 percent, he says.
PMR 31 (4A) states that “After the expiry of a financial year and until they become liable for contributions in respect of the ensuing financial year, owners are liable for contributions of the same amounts and this is payable in the same instalments as were due and payable by them during the expired financial year: provided that the trustees may, if they consider it necessary and by written notice to the owners, increase the contributions due by the owners by a maximum of 10 percent to take account of the anticipated increased liabilities of the body corporate.”
Bauer says it is very useful for trustees to allow for increases and for trustees to avoid having to backdate the increases or raise special levies (very often the AGM is not held until later and the increase should have been implemented by then).
It is important to note, however, that this applies to bodies corporate only and not to homeowners’ associations.
In October 2011 PMR 36 (1) was amended to say that trustees must prepare the levy budget before the financial year end and to present this budget to the members at the AGM, which is a welcome change, says Bauer.
In the past budgets were only prepared weeks before the AGM (usually four months after the financial year end) and the budget was approved by the members.
This would cause financial strain for the scheme’s cash flow which can now be avoided, he adds.