What is a levy? Why do I pay this? I did not sign up for this.

When buying a sectional title unit you automatically become a member of the Body Corporate – you don’t have to sign up or apply for membership.

Section 2 of the STSM Act

  1. (1) With effect from the date on which any person other than the developer becomes an owner of a unit in a scheme, there shall be deemed to be established for that scheme a body corporate of which the developer and such person are members, and any person who thereafter becomes an owner of a unit in that scheme is a member of that body corporate.

One of the functions of the Body Corporate is to collect contributions from the members.  The Act calls them contributions but in the industry we call them levies.

Section 3 of the STSM Act

  1. (1) A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include—

(a) to establish and maintain an administrative fund which is reasonably sufficient to cover the estimated annual operating costs

(b)to establish and maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property but not less than such amounts as may be prescribed by the Minister;

(c) to require the owners, whenever necessary, to make contributions to such funds: Provided that the body corporate must require the owners of sections entitled to the right to the exclusive use of a part or parts of the common property, whether or not such right is registered or conferred by rules, to make such additional contribution to the funds as is estimated necessary to defray the costs of rates and taxes, insurance and maintenance in respect of any such part or parts, including the provision of electricity and water, unless in terms of the rules the owners concerned are responsible for such costs;

There are actually two contributions / levies that owners have to pay – the admin fund levy for operating expenses of the Body Corporate and the reserve fund levy for planned maintenance.

Levies are determined by budgets.  Each Body Corporate must have an admin fund budget for their operating expenses and a reserve fund budget for their planned maintenance.  The budget sets out all the expenses of the Body Corporate in order to determine what income will be needed to pay the expenses.  The income of a Body Corporate is generally levies raised.