One of the fundamental functions of a body corporate is to establish a fund to meet the expenses of the body corporate, including administration, management, repairs and maintenance of the common property.

This fund should include a reasonable provision for future repairs and maintenance.

Ensuring that such a fund is established and, very importantly, maintained, is the responsibility of the trustees. The trustees do so with the assistance of the managing agent, if appointed.

“One goes about ensuring that an adequate fund is maintained by preparing realistic budgets every year for approval by the members at an AGM. Trustees need to be cognizant of actual costs of running the scheme and should further provide for reasonable contingencies. Reference to prior year actual costs is a good starting point. Note that the City of Cape Town’s increases are implemented, annually, in July and this needs to be considered when budgeting as municipal costs often constitute a large percentage of the scheme’s running costs.”

"Repairs and maintenance costs are difficult to foresee, however if the Trustees are aware of upcoming projects, quotes can be obtained, and escalated if necessary, to assist with the budgeting process.”

“Members too need to be realistic when approving a budget at the AGM as amendments thereto, specifically where proposed levies are reduced, could have long terms effects on the overall financial position of the scheme.”

“The ramifications of not establishing and maintaining, adequately, such a fund could result in the scheme not being able to meet its expenses and may result in special levies having to be raised to cover same.”

“Whilst special levies, specifically for major projects such as painting, waterproofing, roofing and improvements, are common place in sectional title, these should be raised for specific purposes only and not to compensate for a lack of funds.”

One must also bear in mind that potential purchasers and bond holders too view the financial statements of a sectional title scheme prior to purchase or granting a bond and that a poor set of financial statements are negatively viewed by both parties.