When Can A Body Corporate Increase Levies On Exclusive Use Areas In Sectional Title Schemes?
Disputes between sectional title unit owners and body corporates over levies are not uncommon. The recent case of Baxter v Ocean View Body Corporate and Others [2023] 2 SA 205 (WCC) sheds light on how these disputes can be adjudicated, particularly when a body corporate imposes increased levies on exclusive use areas.
The appellant, Baxter, owned a unit in the Ocean View sectional title scheme. His unit included exclusive use of a balcony. In 2021, the Body Corporate imposed a levy increase on these exclusive use balconies from R3 to R23 per square metre.
Baxter challenged this decision, arguing that the increase was not compliant with the Sectional Titles Schemes Management Act 8 of 2011 (‘STSMA’).
The substantive issue was whether the Body Corporate’s decision to raise the levy was legally sound. Under section 3(1)(c) of the STSMA, a body corporate can only levy costs on exclusive use areas if it directly bears the responsibility for maintenance, insurance, and other related costs. Alternatively, if the body corporate’s rules place the maintenance burden on the unit owners, then the levy should not include these costs.
In this case, the Body Corporate had a conduct rule stating that owners of exclusive use balconies were responsible for maintaining and repairing these areas. This meant that the Body Corporate could not increase levies to cover these maintenance costs as it was already the responsibility of the owners. The court determined that the levy increase was invalid as it included costs that the owners were already obligated to cover under the conduct rules.
The court ruled in favour of Baxter, finding that the Body Corporate's levy increase was inconsistent with the STSMA. The Body Corporate was directed to recalculate the levy in accordance with the Act, excluding costs that the unit owners were directly responsible for.
If a body corporate rule is to make owners responsible for all costs in respect of their exclusive use areas—so that the proviso to section 3(1)(c) of the STSM Act applies and the body corporate does not need to raise additional exclusive use levies—the text of the rule must make owners responsible not only for maintenance and repair costs, but also for any insurance, electricity and water costs that relate to those areas. Rates and taxes are not typically included in these rules as owners are already responsible for them under municipal law.
Any exclusive use levy for repairs and maintenance should not be calculated so as to include contributions to the scheme’s reserve fund but should be limited to the body corporate’s estimated administrative fund expenses in the current financial year.
The Baxter v Ocean View Body Corporate case underscores the need for meticulous adherence to legal standards when determining and implementing levies in sectional title schemes. For both owners and body corporates, this case reinforces the importance of clarity and compliance in managing shared property interests.