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How to calculate sectional title levies based on participation quota

How to calculate sectional title levies based on participation quotaFor owners of sectional title property investments it’s important to understand how levies are calculated and apportioned according to their participation quota (PQ).

Some may argue that there are certain areas that are included in their PQ that do not use services. If there is no service charge, why should they pay?

For example, what happens with garages? These do not have water and sanitation. Similarly exclusive use areas such as enclosed balconies, store rooms parking bays as well as private gardens would add to the PQ and the resulting levy charge each month. Then there is the issue of ground floor flats, which do not use the lifts, being included in the special levy allocation for lift repairs or maintenance.

Owners may feel it is unfair that these areas are included their PQ but the Sectional Titles Act clause 32(1) states that: “Subject to the provisions of section 48, in the case of a scheme for residential purposes only as defined in any applicable operative town planning scheme, statutory plan or conditions subject to which a development was approved in terms of any law, the participation quota of a section shall be a percentage expressed to four decimal places, and arrived at by dividing the floor area, correct to the nearest square metre, of the section by the floor area, correct to the nearest square metre, of all the sections in the building or buildings comprised in the scheme.”

For example, let’s say the sectional title scheme’s levies amount to R500 000 per annum, at a PQ of 5 percent, your levy would come to R2 083 per month. Calculate 5 percent of the total levies and divide this by twelve to arrive at the monthly levy payment.

When formulating your strategy on how to build a property investment portfolio, it’s essential to consider these factors in selecting good property investments. Before you sign an offer to purchase, understand what your PQ would be and how this is calculated.

IGrow Wealth Investments can guide investors through the process of finding and purchasing the right distressed properties and below market value properties. Understanding what you are buying and minimising your risk, will see you well on your way to building a high-performing property investment portfolio.

The Sectional Titles Act lays out how shared costs should be divided in the fairest and best possible way, enabling a scheme to run efficiently. If owners could change things to suit their own interests, disastrous consequences would surely ensue.

Those buying sectional title investment properties, should understand this from the outset. That way there’ll be no nasty surprises!

4 Comments

  • Michelene TomsReply

    Hi, By law, when should a body corporate be registered (formed) on sectional title units/blocks, once the developer has completed the building and transferred properties to the buyers. Regards Michelene

  • Robert MathewsReply

    Hi,

    I have a one bedroom unit in a sectional title since 2003 with 1 occupant. In May of this year (2015), the managing agents/Body Corporate – Trustees changed to a “PQ” way for billing.

    Can you advise me on the folowing:

    1. Can the Managing Agent/BC-trustees change the billing method?
    2. Is there a process to follow when the billing method is changed? Should unit owners vote, be told of the implications etc?
    3. I have been doing research and it seems that when the “PQ” is used, the unit with the least amount of occupants is penalised, is this acceptable? Should the PQ calculation also take into account the number of occupants?

    Look forward to hearing from you.

    Regards
    Robert

  • Robert MathewsReply

    Hi,

    I have a one bedroom unit in a sectional title since 2003 with 1 occupant. In May of this year (2015), the managing agents/Body Corporate – Trustees changed to a “PQ” way for billing.

    Can you advise me on the folowing:

    1. Can the Managing Agent/BC-trustees change the billing method?
    2. Is there a process to follow when the billing method is changed? Should unit owners vote, be told of the implications etc?
    3. I have been doing research and it seems that when the “PQ” is used, the unit with the least amount of occupants is penalised, is this acceptable? Should the PQ calculation also take into account the number of occupants?

    Look forward to hearing from you.

    Regards
    Robert

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