Zenteq

The Lowdown on Levies

 

One of the most common questions we get asked is “What is the levy for?” or “What is a levy?”

Communal living is by far the most popular form of property ownership and is attractive to many first time home owners because of greater security, maintenance and low cost of entry compared to traditional home ownership.

These very same amenities that attract many purchasers however have a cost implication attached to them. How does one then raise the money to pay for the sparkling pool, the nicely painted homes and security guards? The answer is the levy.

Every year, the owners in the scheme get to vote on and approve a budget. This budget sets out all the expenses the scheme will incur in the coming year and also what maintenance will be done to ensure the property is kept in good condition. In other words, shows owners what it will cost to continue enjoying all the benefits of communal living. Every owner then has to pay money over to the scheme every month or year based on the expenses mentioned above, to ensure that the scheme runs smoothly.

In practice this means that owners generally pay their bonds to the banks, their rates and taxes to the municipality and their levies to the scheme every month.

The question now is how do you calculate what each owner will pay? Surely it is fairer to say that owners who have more people staying in their home should pay more? The answer is yes, that is absolutely correct. On the plans for each scheme, each unit is measured and is expressed as a percentage of the total size of the scheme. This is called your participation quota or PQ for short.

The trustees or managing agent have to do a calculation whereby they take the total expenses of the scheme, divided into monthly installments, and then again divided by the size of each unit. After doing this calculation the figure they get is the levy that that particular owner needs to pay for the financial year.

As you can see the levies raised are really only a function of the schemes expenses. If you believe the levy is too high, the first and almost only place to look at to lower the levy, are the expenses. Generally speaking, the majority of most schemes expenses are the municipal expenses for water, effluent and electricity, followed closely by security costs. We often hear owners saying “but the complex next to mine pays much lower levies”, which may be true, but is not a yardstick for how you own schemes levies are calculated. There is no baseline value for a levy as each schemes needs are different.

Speak to us, your agent or trustees regarding your budget and levies, and how one can do better or budget smarter, and which costs can be minimised. Budgeting can be complex but by no means impossible to do efficiently and we always encourage creative solutions to the ever rising expenses in any scheme.