It was common for trustees of a sectional title scheme to find it challenging to make provisions for the body corporate reserve funds in the annual budget.
In the past, there has been a sort of push and pull regarding raising special levies when the need arises or maintaining higher, monthly levies that secured a sufficient reserve fund over time.
Body corporate reserve funds ultimately eliminate the need to raise a special levy that many members or owners of a sectional title scheme are unsatisfied with.
However, when the Sectional Titles Schemes Management Act of 2011 came into force in October 2016, rules around body corporate reserve funds changed.
Now, bodies corporate are compelled to make provisions for reserve funds on an ongoing basis which fits into the long-term, obligatory maintenance requirements of the scheme.
The maintenance plan must cover a 10-year period and is required to project all forecasted expenditure that will be necessary over this period.
An annual review of the maintenance plan must be carried out to establish what maintenance was in fact carried out throughout the year and what the plan is for the next 10-year period.
This is the original body corporate budget that is still required and makes provision for every day maintenance activities within the sectional title scheme.
This fund serves as an additional budget which provides finances for a 10-year maintenance plan through collecting levies from the members.
The reserve amount must be calculated to ensure there is sufficient capital for the administrative budget.
This calculation is done by way of three methods:
The fundamental purpose of the new Act is to ensure that community schemes such as sectional title schemes continue to save on an ongoing basis.
For more information regarding body corporate reserve funds and other matters related to sectional title schemes in South Africa, please contact us.
Subscribe to our Newsletter
Estate Agent Training
Bond & Transfer Calculator
Get the latest updates in your email box automatically.