Must a developer of a sectional title scheme also pay levies?

“I’ve developed a small sectional title scheme with a few units in town. Most of the units have been sold and the body corporate has been established. The body corporate has now requested me to also contribute to the levies of the scheme. Am I as the developer required to contribute to the levies?”

On closer inspection of the Sectional Title Schemes Management Act 8 of 2011 (“Act”) it is clear that the developer forms part of the body corporate and the Act and its financial obligations are also applicable to the developer.

In respect of the payment of levies in the scheme, it is important to differentiate between units that are already registered in the name of the developer and where the developer is the holder of a right to extend the scheme. In the event that units are already registered in the name of the developer, the developer is regarded as the owner of those units in terms of the Act and will therefore be liable to contribute to the administrative as well as the reserve fund of the scheme for those specific units.

In a recent High Court case it was stated that in the event of a developer being the owner of a right to extend the scheme, the body corporate may recover from the developer an additional contribution, but only for the actual amounts spent on the actual part of the common property reserved in terms of the right to extend. Only when the units are completed on the common property where the right to extend was reserved, and the sectional plans to extend are registered in the Deeds Office, will levies become payable to the body corporate by the developer in respect of these units. Should the developer fail to register the sectional plan of extension within a reasonable time after completion of the units, the body corporate may request payment of levies towards the reserve fund. The latter is to ensure that developers do not evade their financial obligations.

So yes, a developer can be required to contribute to the levies of the body corporate of a scheme. If you are uncertain as to the extent of your obligations as developer, it would be prudent to consult with a property specialist to assist you to determine your exact financial obligations towards the scheme.

February 7, 2018
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