By Engelsman Magabane Incorporated | May 2026 Few words trigger as much emotion in community living as “levy”. In some schemes it is treated like a suspicious invoice; in others, it is the unavoidable price of a shared investment. The truth is simpler, and far less dramatic: a levy is the scheme’s shared survival budget. In a sectional title scheme, the body corporate is not a private landlord and not a charity. It is a statutory management body with real legal duties: to run the common property, pay the bills that keep the building functional, insure what must be insured, and plan for the maintenance that prevents expensive disasters. That is not an opinion — it is written into South Africa’s sectional title law. Under the Sectional Titles Schemes Management Act (STSMA), a body corporate must establish and maintain an administrative fund for operating costs and a reserve fund for future maintenance and repair. When levies are properly budgeted and properly managed, most of what they pay for becomes invisible — because the systems work. You don’t applaud working gates, functioning lights, a dry roof, or clean common areas. You only notice those costs when they fail. This article explains what levies really fund under South African law, why reserve funding and maintenance planning are not optional, and what owners should be looking at if they want clarity rather than WhatsApp speculation. The legal starting point: what the body corporate must fund The STSMA sets out the core functions of a body corporate, and the funding obligations that follow. It requires the body corporate to establish and maintain an administrative fund “reasonably sufficient” to cover estimated annual operating costs, including: It also requires the body corporate to establish and maintain a reserve fund in an amount reasonably sufficient to cover future maintenance and repair of common property, subject to prescribed minimums. This is why levies exist. They are not “extra money”. They are the mechanism used to meet these legal obligations. Two funds, two jobs: administrative fund vs reserve fund In practice, your levy usually contains contributions that support two different kinds of cost. 1) The administrative fund: the day-to-day running costs The prescribed management rules confirm that the administrative fund must be used to fund the operating expenses of the body corporate for that financial year. This is the “keep the building running” pot. It typically covers items like: Some of those costs feel boring. They are boring — until the electricity is cut, the access system fails, or a contractor refuses to attend because accounts are overdue. 2) The reserve fund: the “pay now or panic later” costs The reserve fund is not for routine monthly expenses. It is linked to the scheme’s long-term maintenance and replacement reality. The rules state that the reserve fund must be used for the implementation of the maintenance, repair and replacement plan. This is where many schemes succeed or fail. A reserve fund exists so that big, expensive items do not arrive as “surprises” funded by sudden special levies. Think roofs, waterproofing, lifts, pumps, perimeter systems, major electrical work, painting cycles, structural repairs — the capital items that cost real money, not “callout” money. Maintenance planning is not optional paperwork South African sectional title regulations require a written maintenance, repair and replacement plan for common property. The plan must set out major capital items expected to require maintenance/repair/replacement within the next 10 years, their condition, timing, estimated cost, expected life, and other relevant information. The plan takes effect when approved by members in general meeting, and trustees must report to each annual general meeting on how it has been implemented. This matters because it separates responsible schemes from reactive schemes. Responsible schemes plan. Reactive schemes patch. Planned maintenance is predictable. Deferred maintenance becomes an emergency — and emergencies are expensive, disruptive, and often trigger conflict because they arrive as a sudden “special levy” nobody budgeted for. Insurance: protection for the scheme as a whole, not your sofa Insurance is another levy-funded reality many owners misunderstand. The STSMA explicitly includes insurance premiums as part of the operating costs the administrative fund must cover. Insurance is designed to protect the structure and common property risk, not to replace everything inside a unit. When insurance is under-funded, under-managed, or misunderstood, the consequences can be severe: claims delays, shortfalls, disputes over responsibility, and disputes over special levies when damage must still be repaired. The legal principle is simple: the scheme must protect what the body corporate is responsible for. The financial principle is equally simple: insurance is cheaper than rebuilding without it. Why levy transparency matters: owners need more than a total figure Levies are not meant to be a mysterious black hole. They are meant to be structured contributions used to meet a legal set of obligations. If owners want clarity, the best place to look is not a rumour thread. It is the governance documents: the budget, the financials, and the maintenance plan. South African rules require the body corporate to hold an annual general meeting within four months of the end of each financial year (unless all members waive it in writing and consent to resolutions that cover the required business). That annual process is where the “why” of levy numbers should be visible: what costs increased, what contracts changed, what maintenance is planned, what reserve targets exist, and what financial position the scheme is in. The costs you only notice when they fail The most practical way to understand levies is to list what happens when they are not properly funded or properly managed. When levies are poorly collected or poorly budgeted, schemes commonly see: None of those problems start as “drama”. They start as ordinary bills not being paid on time, maintenance being postponed, or long-term planning being ignored. What owners should check if they want real answers Owners do not need to be auditors to ask sensible questions. They need to be consistent and specific. A good governance checklist