Real Estate Investor Magazine South Africa June 2014 | Page 40

STRATEGIES
shortfall and then work on how much the levies need to
be increased for the year ahead.  They will also be able
to see how many of the owners have not paid in full or
on time and work out a proper contingency plan to get
money in when it is needed.

The items on every budget will usually include:
 Municipal services:  which are the water, electricity, sewage
and refuse removal costs.  Thankfully, since 2008, the rates
are no longer added to this bill and are billed separately to
each owner, which reduces the administration time.  If the
scheme has prepaid meters for water and electricity is also
reduces the burden on the scheme. This part of the budget
is usually the most onerous and unpredictable in that it is
difficult to predict what the consumption will be.

“If you, as an owner in a sectional

title scheme, are worried about the
levy budget in your scheme... you
should make every effort to attend
the AGM and get involved.”
Insurance for the scheme is compulsory and the trustees
must ensure that the policy taken out covers the buildings
for its full replacement value as well as the common
property value.  We usually advise the trustees to call in a
professional valuer every few years, just to get a fair idea of
what the insured value should be.  

Maintenance in the current year will probably be
necessary so provision should be made for general items that
will need to be done, such as the painting of the exterior
walls or the servicing of the gate motors.  Maintenance, in
some form or another will come up regularly and so should
never be left off the budget and should never have to be paid
for from the raising of special levies.

Larger projects, such as a window frame replacements or
a roof refurbishment, may need to be done in the future,
and these projects can be planned for by setting the time
frame for the project, say two or three years’ time, and then
allowed for in the budget by saving up the amount that
might be needed.  
38

June 2014 SA Real Estate Investor

Bank charges are often missed and these could add up to
considerable sums each year.  The trustees must check that
this is on the list of items to include in the budget, and must
also allow for an increase in the tariffs charged by the bank.  
 Administrative costs, such as stationery used, telephone
calls made by the trustees, petrol used to collect items for the
scheme, and so on.  These costs will not usually be high, but
must still be allowed for.  

Auditing fees must be added to the budget as the books
must be audited by an approved auditor unless the scheme
has less than ten units.  If so, an accounting officer can sign
off the financials, but this will still have to be paid for.  

A contingency amount for unforeseen minor expenses
should be included in the budget, as these minor incidents
do happen in every scheme and it is better to have money
set aside for it.  Items that would fall into this budget are
perhaps vandalised post boxes or a boom that is damaged
by a vehicle.  

Other regular costs, if relevant to the scheme, such as the
security or guard services each month, the managing agent’s
fees, staff employed by the scheme (gardeners or cleaners),
garden services or window cleaning, should obviously also
be incl YY[