New sectional title legislation will drive up monthly levies substantially

BOKSBURG, South Africa - Oct. 6, 2016 - PRLog -- One of the changes that has been made in the management of sectional title schemes and is now covered in the Sectional Title Schemes Management Act (STSMA) and the Community Services Ombuds Services Act (CSOSA) is that each sectional title scheme needs to establish a reserve fund.

The amount that has been suggested that will be required is 25% of the budgeted annual levy figure, ie. if the levies to be collected for the year amount to R 500 000.00 then an additional reserve amount of R125 000.00 must be collected, says Simon Smith of Harcourts Full Circle.

The aim of this reserve fund is to ensure that a fund is established to cater for future maintenance and repairs to the common property. For sectional title schemes that have not already been following this practice and have little or no reserves this will mean minimum 25% increase in the next levies for the next 12 months.

The trustees and managing agents have 90 days from the envisaged date of publication in the Government Gazette which is the 7^th October 2016 to make the required changes.

This change is something that is much needed in the sectional title sector as too many schemes run into disrepair as a result of improper budgeting and financial planning and as a result there is never enough money to effective repairs and maintenance. As a result, many property owners in these schemes end up losing substantial amounts of money as their properties decrease in value.

In addition to the above the banks look very closely at the financial situation of each sectional title scheme before lending money to a potential buyer and if the scheme is not financially sound the banks will not provide the necessary funding to a potential buyer which then means the potential pool of buyers into that scheme is greatly reduced and as a result this will further prejudice the value of the individual units within the scheme.

For more info visit our website: http://fullcircle.harcourts.co.za/Profile/Simon-Smith/11358