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

January 2018

“I’ve developed as small sectional title scheme in town with a few units on
them. 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 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.

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