For many new sectional title owners, receiving notice of a special levy comes as an unwelcome surprise. Understanding special levies, why they exist, and how they're governed can help owners plan ahead and avoid unnecessary frustration.
This blog explains what special levies are, the law that governs them, the different forms they can take, best practices for handling them, and how professional property managers can assist bodies corporate with their administration.
What Are Special Levies?
A special levy is an additional financial contribution raised from owners to cover unbudgeted, unforeseen expenses that fall outside the scheme's normal annual budget.
Unlike ordinary monthly levies, which are planned and approved in advance to cover the scheme's regular running costs, special levies are reactive. They're typically raised for emergency repairs, urgent structural work, or once-off projects that couldn't have been reasonably anticipated when the annual budget was set.
It's a common misconception that the introduction of compulsory reserve funds eliminated the need for special levies. While reserve funds have improved long-term financial planning in sectional title schemes, they haven't done away with special levies altogether, particularly for genuinely unexpected costs.
The Law Regarding Special Levies
Special levies are governed by the Sectional Titles Schemes Management Act (STSMA), which gives trustees the authority to raise them under specific conditions.
Importantly, a special levy can be approved through a trustee resolution alone. It doesn't require the same approval process as the annual budget, which must be presented to and approved by all owners at the Annual General Meeting.
However, this authority isn't unlimited. Two key restrictions apply:
- The expense must be genuinely necessary and unable to reasonably wait for inclusion in the next annual budget
- A special levy cannot be raised to cover an expense that was already included in the budget approved at the last AGM
This means trustees can't use special levies to cover routine maintenance that should have been properly budgeted for, nor can they use them simply to boost the scheme's available funds.
Once passed, a special levy becomes legally binding, and owners cannot simply refuse to pay it.
Different Forms of Special Levies
While all special levies serve the same core purpose, covering unbudgeted costs, they can take a few different forms depending on the circumstances.
Emergency repair levies: Raised in response to sudden, urgent issues, such as storm damage, structural failures, or critical infrastructure breakdowns that require immediate attention.
Capital improvement levies: Used to fund larger, once-off projects that go beyond standard maintenance, such as major upgrades to security systems or significant common property improvements.
Shortfall levies: Sometimes raised where the scheme's existing funds are insufficient to cover an urgent cost, even if the underlying issue relates to ongoing maintenance that wasn't adequately budgeted for.
In all cases, trustees are required to clearly communicate to owners how much the special levy will be, what it will be used for, and over what period it will be payable, whether as a lump sum or spread over several months.
How Special Levies Affect Property Sales
Special levies carry unique implications when a sectional title unit is sold, and this is an area that often catches buyers and sellers off guard.
Unlike ordinary levies, which transfer to the new owner on a pro-rata basis from the date of transfer, liability for a special levy shifts differently under current legislation. Once a special levy resolution has been passed, liability transfers automatically to the purchaser, who becomes responsible for their pro-rata portion from the date the transfer is registered.
This is a notable shift from the previous legislative position, where sellers were generally required to settle special levies in full before transfer could proceed.
To avoid disputes, both buyers and sellers should ensure the sale agreement clearly addresses who is responsible for existing special levies and who will bear liability for any special levies that may arise after transfer. Buyers, in particular, should request up-to-date financial information from the body corporate before finalising a purchase.
Best Practices for Managing Special Levies
Because special levies can place financial strain on owners, trustees should approach them thoughtfully and transparently.
Communicate early and clearly: Owners should be informed of a special levy as soon as possible, along with a clear explanation of the reason for it and how the amount was calculated.
Confirm decisions formally: Even though member approval isn't required, trustees should pass and document a formal resolution confirming the decision to raise a special levy.
Offer flexible payment terms where possible: Allowing owners to pay a special levy over a period, rather than as a lump sum, can ease the financial impact, provided this is feasible for the scheme's cash flow needs.
Strengthen the reserve fund: A well-maintained reserve fund, informed by an accurate 10-year maintenance plan, can reduce how often special levies are needed in the first place.
How Property Managers Can Assist
Administering special levies correctly requires careful attention to legislative requirements, financial planning, and clear owner communication, areas where professional property managers add significant value.
Property managers can assist by:
- Helping trustees assess whether a proposed expense genuinely qualifies for a special levy
- Preparing the documentation and resolutions required to formally raise a special levy
- Communicating special levy details clearly and promptly to all owners
- Managing collection, payment plans, and record-keeping
- Advising on reserve fund planning to reduce future reliance on special levies
Ultimately, property managers are there to guide and support the process. The final decision on whether to raise a special levy, and how it is structured, always rests with the trustees as the governing body of the scheme.
Conclusion
Special levies remain an important financial tool for sectional title schemes, allowing bodies corporate to respond to genuinely unforeseen expenses without disrupting the scheme's day-to-day operations. Understanding the legal framework, the different forms special levies can take, and their implications for property sales helps owners navigate them with far less frustration.
With the guidance of an experienced property manager, bodies corporate can raise and administer special levies responsibly, communicate clearly with owners, and build stronger financial resilience over time.
FAQs
Who must pay the CSOS levy?
The CSOS levy is payable by the body corporate, which collects the contribution from owners as part of their monthly levies. The amount is generally based on the value of each unit, with certain lower-value units exempt from the levy.
Do levies include water and electricity?
This depends on the scheme. In some sectional title schemes, water and electricity for common property use are included within the standard levy, while individually metered consumption within a unit is typically billed separately to the owner or tenant.
Do you pay levies monthly?
Yes, ordinary levies are typically paid monthly and are based on the body corporate's approved annual budget. Special levies, however, may be structured differently, either as a once-off lump sum or spread over an agreed period.
Who pays levies, tenant or landlord?
The legal obligation to pay levies to the body corporate rests with the registered owner of the unit, not the tenant. While a landlord may arrange for a tenant to cover levy costs as part of their rental agreement, the owner remains ultimately responsible for ensuring levies are paid in full and on time.
