How to calculate your community scheme levy.

By: Intasure | 2 December 2020 Share:

Creating a financial roadmap for your sectional title scheme starts with understanding how your levy is calculated and what it includes.  There are three parts that make up the community scheme levy, namely the contributions required for the reserve fund, the contributions to the admin fund and the CSOS fee.

Part 1: Reserve fund forecast.

The reserve fund levy amount is determined by the following calculation: Cost of planned maintenance activities – (reserve fund opening balance + interest earned on reserve fund account) It is best practice to perform this calculation not only for the year ahead, but against the backdrop of the 10-year maintenance plan.

Part 2: Administrative fund levy.

The admin fund pays for operational expenses. Budgeting for the admin fund is an essential step towards gaining control of your body corporate’s expenses. This can be improved by taking the same long-term approach as described for the reserve fund– by projecting the admin fund cashflow over 10 years.

Part 3: CSOS levy.

Section 11 of the CSOS Regulations of 2016 stipulates that a levy is payable by every community scheme on a quarterly basis. The CSOS levy to be collected from the unit owners is calculated as “the lesser of R 40.00 or 2% of the amount by which the monthly levy charged by the Scheme exceeds R 500.00”.

Click Here For Levy Calculation Formula

Cashflow forecast.

Where a body corporate has a history of poor financial management, it may have to resort to a special levy or a bridging loan before getting back on track to financial prosperity. With a regularly updated cashflow forecast in hand, the trustees possess the perfect tool to lessen the dependency on such radical measures.

Reserve fund forecast
This long-term approach is best achieved by creating a 10-year reserve fund cashflow forecast that is based directly on the 10-year maintenance plan. It will tell you exactly how much money is available at the end of each financial year based on the opening balance, interest earned, levy contributions and maintenance expenditure.

Admin fund forecast
Budgeting for the admin fund is an essential step towards maintaining control of a body corporate’s expenses. By combining the 10-year cashflow forecasts of both the reserve fund and the admin fund, a body corporate will be in complete control of its financial wellbeing.

Article with thanks to Mirfin Valuation Services

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