What is the legislation around levy increases?
ELA
EstateIQ Legislative Assistant
Here is a comprehensive explanation of the legislation governing levy increases in sectional title schemes, based entirely on the Sectional Titles Schemes Management Act, 2011 (STSMA), the Regulations, and Annexure 1 — Management Rules.
🧾 LEGISLATION GOVERNING LEVY INCREASES IN SECTIONAL TITLE SCHEMES
1️⃣ The Legislative Framework
Levy increases are governed by a combination of:
- Section 3 of the STSMA (functions of bodies corporate),
- Regulation 2 (minimum reserve fund contributions), and
- Management Rules 21 and 25, Annexure 1 (prescribed under the Regulations).
Together, these provisions set out:
- how levies are determined,
- who approves increases, and
- when trustees may act independently.
2️⃣ Ordinary (Annual) Levies
⚖️ Legal Basis
Under section 3(1)(a)–(f) of the STSMA, the body corporate must:
- establish administrative and reserve funds;
- prepare an annual budget to cover operating and maintenance costs;
- determine the total amount to be raised; and
- levy contributions on owners in proportion to their participation quotas.
🗓️ Approval Process
Per Management Rule 25(1)–(3), Annexure 1, the trustees prepare the draft budget and present it at the annual general meeting (AGM).
At the AGM:
- The owners approve the budget by ordinary resolution;
- The levy amounts for the upcoming financial year are then adopted based on that budget.
Ordinary levy increases can therefore occur only through owner approval at the AGM (or a special general meeting called for that purpose).
3️⃣ Special Contributions (Special Levies)
⚖️ Legal Basis
Under section 3(3)–(4) of the STSMA, trustees may raise a special contribution at any time by trustee resolution.
🧾 Key Features
- This is a separate levy, not an increase in ordinary levies.
- It is used to fund unforeseen, urgent, or unbudgeted expenses (for example, a burst pipe, legal costs, or roof collapse).
- The levy becomes immediately due once the trustees pass the resolution.
- Owners must be notified and the decision reported at the next AGM.
Purpose: To address unexpected financial obligations without waiting for the next AGM.
4️⃣ Temporary 10% Increase Authority (Management Rule 21(3)(b))
⚖️ Source: Management Rule 21(3)(b), Annexure 1
This is the only provision in South African sectional title legislation that permits trustees to temporarily increase ordinary levies without prior owner approval.
It provides that:
Trustees may increase the contributions due by members by a maximum of 10% at the end of a financial year to account for anticipated increased liabilities, which increase remains effective until members receive notice of the new contributions for the next financial year.
📋 Conditions
- Limit: The increase cannot exceed 10% of the current levy.
- Duration: It is temporary, expiring once the new AGM-approved budget takes effect.
- Purpose: To bridge the gap between the financial year-end and the next AGM when a new budget has not yet been adopted.
- Notice: Trustees must give members written notice of the increased contributions, following Management Rule 25 procedures.
- Transparency: The increase must be reasonable and justifiable, reflecting expected cost increases (e.g., insurance, utilities, maintenance).
This rule ensures financial stability when AGM timing lags behind the scheme's financial year-end.
5️⃣ Reserve Fund Requirements
Under Regulation 2 (read with section 3(1)(b) of the STSMA), bodies corporate must make minimum annual contributions to the reserve fund, depending on the fund's balance.
This obligation often influences levy increases because it sets a floor for budgeting future maintenance contributions.
6️⃣ Practical Example
If a scheme's financial year ends on 31 December, but its AGM is only held in April, the trustees may:
- Continue charging the previous year's levies; or
- Apply a temporary increase of up to 10% (under Rule 21(3)(b)) from January until the new AGM-approved budget is adopted; or
- If a sudden, exceptional cost arises, raise a special levy under STSMA section 3(3).
Once the AGM is held and a new budget approved, the temporary 10% levy ends automatically.
7️⃣ Summary Table
| Type of Levy | Who Approves | Purpose | When Payable | Legal Reference |
|---|---|---|---|---|
| Ordinary (annual) levy | Owners at AGM | Routine operating & maintenance costs | Ongoing for each financial year | STSMA s3(1)(a)–(f); MR 25 |
| Special contribution (special levy) | Trustees by resolution | Unforeseen or urgent expenses | Immediately upon resolution | STSMA s3(3)–(4) |
| Temporary 10% interim increase | Trustees by authority of rule | Anticipated cost escalation between financial years | Until next AGM budget adopted | Management Rule 21(3)(b), Annexure 1 |
✅ In Summary
- Ordinary levy increases must be approved by owners at the AGM (or SGM).
- Trustees cannot increase normal levies mid-year, except as permitted under:
- STSMA section 3(3) for special contributions, and
- Management Rule 21(3)(b) for a temporary increase of up to 10% at financial year-end.
- All increases must be properly documented and notified to owners in writing.
⚖️ Regulation 2 — Minimum Reserve Fund Contributions
Regulation 2 of the Sectional Titles Schemes Management Regulations, 2016, which directly supports section 3(1)(b) of the Sectional Titles Schemes Management Act, 2011 (STSMA).
This regulation deals not with levy increases themselves, but with the minimum contribution that must be budgeted each year for the reserve fund, which in turn affects the amount of levies charged to owners.
⚖️ LEGAL SOURCE
Regulation 2 — Minimum amounts for reserve fund
(made under the STSMA and published in GN R1231 of 2016)
It specifies how much a body corporate must contribute annually to its reserve fund, depending on the balance of that fund at the end of the previous financial year.
📘 1️⃣ Purpose of Regulation 2
Under STSMA s 3(1)(b), a body corporate must:
"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."
Regulation 2 provides those "prescribed minimum amounts."
The aim is to ensure every scheme builds and maintains an adequate financial buffer for future maintenance, so it doesn't rely only on special levies or emergency collections.
🧾 2️⃣ How the Minimum Reserve Contribution Is Calculated
Regulation 2 sets out three scenarios:
| Situation at end of previous financial year | Required minimum contribution for the next financial year |
|---|---|
| Reserve fund balance < 25% of total administrative fund contributions for that year | The budgeted reserve fund contribution must be at least 15% of the total budgeted administrative fund contribution for the new year. |
| Reserve fund balance ≥ 100% of total administrative fund contributions for that year | No minimum contribution required (the body corporate may still budget more if necessary). |
| Reserve fund balance > 25% but < 100% of total administrative fund contributions | The budgeted reserve fund contribution must be at least equal to the amount budgeted to be spent from the administrative fund on repairs and maintenance to the common property during the new year. |
🧮 3️⃣ Example
Suppose:
- Total administrative fund contributions last year = R1 000 000
- Reserve fund balance at year-end = R150 000 (15%)
Since 15% < 25%, the body corporate must budget at least 15% of R1 000 000 = R150 000 for the reserve fund for the coming year.
If, instead, the reserve fund balance were R800 000 (80%), the minimum would be equal to the budgeted repairs and maintenance cost for the new year (say, R120 000).
If it were R1 200 000 (120%), no statutory minimum would apply.
🏛️ 4️⃣ Compliance and Legislative Effect
- This regulation is binding on all bodies corporate.
- The trustees must factor these reserve fund contributions into the annual budget presented to owners at the AGM (see Management Rule 25).
- Non-compliance may result in CSOS intervention or findings of financial mismanagement under STSMA s 16(2).
🧩 5️⃣ Connection to Levy Increases
Although Regulation 2 does not directly prescribe how much levies may rise, it influences levy calculations, because:
- The required reserve fund contribution forms part of the total annual levy income; and
- If the scheme's reserve fund falls below 25% of its administrative fund, levies may need to increase significantly to meet the 15% minimum threshold.
Hence, Regulation 2 indirectly drives levy increases when the reserve fund is under-capitalised.
✅ Summary of Regulation 2
| Element | Requirement |
|---|---|
| Purpose | Ensure a minimum annual contribution to the reserve fund |
| Applies to | All bodies corporate governed by the STSMA |
| Three thresholds | < 25%, between 25–100%, ≥ 100% of admin fund balance |
| Effect | Sets the minimum reserve contribution that must be budgeted each year |
| Impact | Influences overall levy amounts to maintain financial sustainability |
ELL
EstateIQ Legal Lookup
Sectional Title Schemes Management Act
3 FUNCTIONS OF BODIES CORPORATE
3(1): A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include
3(1)(a): to establish and maintain an administrative fund which is reasonably sufficient to cover the estimated annual operating costs
(i) for the repair, maintenance, management and administration of the common property (including reasonable provision for future maintenance and repairs);
(ii) for the payment of rates and taxes and other local municipality charges for the supply of electricity, gas, water, fuel and sanitary or other services to the building or land;
(iii) for the payment of any insurance premiums relating to the building or land; and
(iv) for the discharge of any duty or fulfilment of any other obligation of the body corporate;
3(1)(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;
3(1)(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;
3(1)(d): to require from a developer who is entitled to extend the scheme in terms of a right reserved in section 25(1) of the Sectional Titles Act, to make such reasonable additional contribution to the funds as may be necessary to defray the cost of rates and taxes, insurance and maintenance of the part or parts of the common property affected by the reservation, including a contribution for the provision of electricity and water and other expenses and costs in respect of and attributable to the relevant part or part;
3(1)(e): to determine the amounts to be raised for the purposes of paragraphs (a), (b) and (c)
3(1)(f): to raise the amounts so determined by levying contributions on the owners in proportion to the quotas of their respective sections;
3(3): Any special contribution becomes due on the passing of a resolution in this regard by the trustees of the body corporate levying such contribution and may be recovered by the body corporate by an application to an ombud, from the persons who were owners of units at the time when such resolution was passed: Provided that upon the change of ownership of a unit, the successor in title becomes liable for the pro rata payment of such contributions from the date of change of such ownership.
3(4): Special contribution, for the purposes of this section, means any contribution levied under subsection (1) other than contributions which arise from the approval of the estimate of income and expenditure at an annual general meeting of a body corporate, determined to be a contribution to be levied upon the owners during the current financial year.
3(5): The body corporate must, annually or whenever there is a change in levy, certify in writing
3(5)(a): the amount determined as the contribution of each owner;
3(5)(b): the manner in which such contribution is payable; and
3(5)(c): the extent to which such contribution has been paid by each owner.
Management Rules
Management Rule 21(3)
21(3): The body corporate may, on the authority of a written trustee resolution—
21(3)(b): increase the contributions due by the members by a maximum of 10 per cent at the end of a financial year to take account of the anticipated increased liabilities of the body corporate, which increase will remain effective until members receive notice of the contributions due by them for the next financial year; provided that the trustees must give members notice of such increased contributions by notice in terms of rule 25, with such changes as are required by the context;
25 CONTRIBUTIONS AND CHARGES
25(1): The body corporate must, as soon as possible but not later than 14 days after the approval of the budgets referred to in rule 17(6)(j)(iv) by a general meeting, give each member written notice of the contributions and charges due and payable by that member to the body corporate, which notice must—
25(1)(a): state that the member has an obligation to pay the specified contributions and charges; and
25(1)(b): specify the due date for each payment; and
25(1)(c): if applicable, state that interest at a rate specified in the notice will be payable on any overdue contributions and charges; and
25(1)(d): include details of the dispute resolution process that applies in respect of disputed contributions and charges.
25(2): If money owing is not paid on the dates specified in the notice referred to in subrule (1), the body corporate must send a final notice to the member, which notice must state—
25(2)(a): that the member has an obligation to pay the overdue contributions and charges and any applicable interest immediately; and
25(2)(b): if applicable—
(i) the interest that is payable in respect of the overdue contributions and charges at the date of the final notice; and
(ii) the amount of interest that will accrue daily until the payment of the overdue contributions and charges; and
25(2)(c): that the body corporate intends to take action to recover the amount due if the overdue contributions and charges and interest owing are not paid within 14 days after the date the final notice is given.
25(3): Subject to rules 21(3)(a) and (b), after the expiry of a financial year and until they become liable for contributions in respect of the next financial year, members are liable for contributions in the same amounts and payable in the same instalments as were due and payable by them during the past financial year.
(Editorial Note: Wording as per original Government Gazette. It is suggested that the word "installments" is intended to be "instalments.")
📖 Further Reading
For a comprehensive guide on this topic, read our detailed blog post:
Sectional Title Levies Guide →