Two types of body corporate funds are available according to the Sectional Title Schemes Management Act (STSMA) 8 of 2011 and the Prescribed Management Rules (PMR). These funds are referred to as the administrative and reserve funds and each have a separate purpose.
The STSMA stipulates that a body corporate is required to establish as well as maintain a reserve fund. The amount available in this fund must be sufficient to cover costs of future maintenance and repair of the estate’s common property. The minister will prescribe a minimum amount which may be available in the reserve fund.
In accordance with the PMR, the body corporate must use the reserve fund to carry out repair, maintenance and/or replacements which may be necessary.
Additionally, the PMR states that funds may be paid from the reserve fund according to trustee resolutions and approved repair, maintenance and replacement plan or for the purpose of urgent repair, maintenance or replacement expenses. These expenses include but are not limited to:
The members must be made aware as soon as possible of any expenditure that has been made. Expenditure used from the reserve fund must comply with any restrictions as stipulated by members and must not exceed the amount required for the expense nor any limitations set out by the body corporate.
In accordance with the PMR, amounts paid into a reserve fund must include:
All funds excluded the above mentioned must be paid into the administrative fund so as to keep the two incomes separate.
The STSMA indicates that a body corporate is required to establish and maintain an administrative fund which is sufficient enough to cover the annual costs of:
According to the PMR, the operating expenses of the body corporate for a particular financial year must be funded by the administrative fund.
Additionally, the PMR states that money paid from the administrative fund is to be in accordance with the approved budget for the fund.
Contact our property lawyers in Johannesburg and Cape Town for more information about body corporate funds or any other matters related to property law in South Africa.
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