Exclusive Use Levies, What you need to know

The Sectional Titles Schemes Management Act (STSMA) and its Prescribed Management Rules (PMRs) and Prescribed Conduct Rules (PCRs) provide the framework for the management of sectional title schemes in South Africa. Regarding Exclusive Use Areas (EUAs) and the imposition of levies for their maintenance, the situation is nuanced:

General Principle:

• Section 3(1)(c) of the STSMA mandates that the body corporate must require owners who have exclusive use of a part of the common property to make additional contributions to the body corporate fund to cover costs related to that EUA. These costs include rates, taxes, insurance, and maintenance. This applies whether the exclusive use right is registered or conferred by the rules.

Levy for EUA Maintenance:

• Based on Section 3(1)(c), it is generally mandatory for the body corporate to ensure that owners of EUAs contribute towards the maintenance costs of those areas. This is to avoid a situation where all owners in the scheme subsidize the maintenance of areas that only benefit a specific owner or group of owners.

Body Corporate Generating Sufficient Funds:

• The question arises if a separate levy for EUAs is still required if the body corporate's general funds are sufficient to cover the maintenance of these areas. While the body corporate might have a surplus, the principle of fairness and equitable cost distribution usually dictates that the owners who have exclusive use should bear the financial responsibility for the upkeep of those specific areas.

• Not imposing a separate EUA levy when maintenance costs are incurred for those areas could be seen as other owners subsidizing the EUA holders, which goes against the intention of the STSMA.

• The purpose of Section 3(1)(c) is specifically to ensure that those who benefit exclusively from a part of the common property also contribute to its related expenses, including maintenance.

Exceptions or Considerations:

• Scheme Rules: The rules of a specific sectional title scheme can sometimes outline the responsibilities for maintenance of EUAs differently. If the rules explicitly state that the owner of the EUA is solely responsible for all maintenance and repair costs within their EUA, and not the body corporate, then the body corporate might not impose a levy for this purpose. However, the body corporate would still likely levy for other EUA-related costs like insurance and rates.

• Type of EUA: The nature of the EUA and what constitutes "maintenance" can sometimes be a point of contention. For example, the maintenance of a garden area might be different from the maintenance of a parking bay.

• Transparency and Budgeting: Even if the body corporate has sufficient funds, it is good practice to transparently budget for the estimated costs of maintaining EUAs and allocate these costs to the relevant EUA holders through a specific levy. This ensures accountability and clarity in the scheme's finances.

• High Court Guidance: Recent court cases have provided guidance on how EUA levies should be calculated, emphasizing that they should be based on the actual anticipated costs related to the EUA and should not include contributions to the scheme's reserve fund for general common property maintenance.

In conclusion, while a body corporate might have sufficient general funds, the STSMA generally mandates that a levy be imposed on owners of Exclusive Use Areas to cover the costs associated with those areas, including maintenance. This is to ensure fair and equitable cost distribution. The specific rules of the scheme might have provisions that alter this in terms of who performs and pays for the maintenance, but a contribution towards EUA-related expenses by the EUA holder is usually required.

It is always recommended to consult the specific rules of your sectional title scheme and seek legal advice if there is any uncertainty regarding the interpretation and application of the STSMA and its rules concerning EUA levies and maintenance.