August 11, 2026
A low levy is not a discount. It is a warning sign.
Buyers on the Atlantic Seaboard, under pressure from rising costs everywhere else in their lives, have started filtering their property searches by levy amount. A cheaper levy feels like a monthly saving. The building next door, charging a higher levy for a similar apartment, looks less appealing on the spreadsheet.
The spreadsheet is misleading. In sectional title, the levy is not the cost of the apartment, it is the operating budget of the building. And a building operating on an inadequate budget is a building storing up a bill for later.
That bill arrives as a special levy. It can run to R30,000, R50,000, R100,000 per unit or more, payable in a lump sum on notice. It arrives when the roof needs replacing, when the lift fails, when the facade needs repair, when the building has to be repainted after the reserve fund has been drained. The owners who thought they were saving R2,000 a month for a decade find themselves paying R80,000 in a single quarter to catch up.
The single most important financial number in any sectional title purchase is not the levy. It is the reserve fund.
"Levies are the lifeblood of a body corporate."
Under South African law, every body corporate must run two funds. The distinction matters, and most buyers do not know it exists.
The administrative fund covers the operating costs of the building. Cleaning, security, insurance, maintenance of common property, municipal charges for services in the common areas, staff, accounting. This is the day-to-day cost of keeping the building running. It is funded by the monthly levy paid by every owner in proportion to their participation quota, which is essentially the unit's floor area as a share of the total scheme.
The reserve fund is separate. It covers long-term maintenance, repair, and replacement of common property. The roof, the lift, the facade, the plumbing, the paint. Everything that does not need attention this year but will need attention in the next ten. It has been legally required in every South African sectional title scheme since 7 October 2016, when the Sectional Titles Schemes Management Act came into force.
These two funds are governed by section 3(1)(a) and (b) of the STSMA and are treated separately in the body corporate's accounts. Money in the reserve fund can only be used for items on the maintenance, repair and replacement plan. Money in the administrative fund funds this year's operations. Mixing them is a breach.
The reason for the separation is straightforward. Before 2016, many schemes ran no reserve fund at all. When major maintenance came due, the money was not there, and the owners were hit with a special levy on 30 days' notice. The STSMA was written to prevent this from happening at scale, and the mechanism it introduced is worth understanding in detail.
Regulation 2 of the STSMA Regulations prescribes exactly how much a body corporate must contribute to its reserve fund each year. It is one of the few numbers in property that a buyer can verify by asking one question.
The calculation runs in three tiers, based on the reserve fund's balance at the end of the previous financial year compared to that year's administrative fund contributions.
Tier one. If the reserve fund balance is less than 25 percent of the previous year's administrative fund contributions, the budgeted reserve contribution for the new year must be at least 15 percent of the total budgeted administrative fund contribution.
Tier two. If the reserve fund balance is between 25 percent and 100 percent of the previous year's administrative contributions, the budgeted reserve contribution must be at least equal to the amount by which the total budgeted maintenance expenses exceed the reserve fund balance.
Tier three. If the reserve fund balance is at 100 percent or more of the previous year's administrative contributions, no minimum contribution is required. The reserve is well-funded, and the body corporate has flexibility.
The tier a building sits in tells the buyer, in one number, whether the reserve fund is being built or drained. A building that has been in tier one for years is a building where the reserve is not catching up. A building in tier three is a building running properly.
Every body corporate is required to disclose this information at its annual general meeting. Any buyer can request the last two years of financial statements and the current budget. The number is there, in the second line of the reserve fund note. It is calculable in under five minutes.
Most buyers never ask.
Beyond the reserve fund calculation, there are four other indicators of a well-run sectional title scheme that a buyer can check in the same document pack.
The maintenance, repair and replacement plan is a written schedule covering at least ten years of anticipated common-property maintenance. Every body corporate is required to maintain one under Prescribed Management Rule 22. A building without a current MR&R plan is a building running blind.
The levy schedule should be aligned with actual running costs. Typical 2026 ranges for Atlantic Seaboard-style sectional title schemes run from approximately R45 to R90 per square metre per month, depending on amenities and service levels. A levy sitting materially below this range for a comparable building is a signal to ask questions.
The arrears position should be low. A body corporate with a significant portion of owners in arrears has a cash flow problem now and a special levy risk later.
The audit position should be clean. Qualified audits, late audits, or auditor concerns are all indicators of a body corporate that is not being run to standard.
Industry commentary has been increasingly direct on this point through 2025 and 2026. Recent analysis has warned that below-market levies often mask financial trouble in a sectional title scheme, and that filtering property searches by levy amount can steer buyers into schemes that face special levies of tens of thousands of rand, maintenance backlogs, and lower resale values.
The consensus is emerging. A low levy is not a saving.
Paul's transcript for this episode named one of the concrete recurring costs: a building typically needs to be repainted every five years. That single line captures the reality of running a sectional title scheme better than any general principle. The paint costs what it costs. The lift replacement costs what it costs. The roof costs what it costs.
Levies do not create these costs. They fund them. A body corporate that under-charges its owners is not saving anyone money, it is deferring the moment at which the money has to be found. The maths does not change.
The buildings that hold their value across cycles are the ones where this maths has been done properly from the beginning. The reserve fund is topped up in the years when nothing major is happening, and the money is there in the years when it is. The buildings that degrade are the ones where the reserve fund was allowed to run down, the maintenance was deferred, and the special levy arrived as a surprise.
Governance is part of the product. So is the balance sheet.
Before you sign an offer-to-purchase on a sectional title apartment, ask for four documents.
First, the current annual financial statements and the current budget. Look at the reserve fund balance and the reserve fund contribution. Run the tier calculation. If you cannot tell which tier the scheme sits in from the statements, that is itself an answer.
Second, the maintenance, repair and replacement plan. It should cover ten years. It should list the major maintenance items and their expected timing. It should be current.
Third, the levy schedule alongside the levies of two or three comparable buildings in the same neighbourhood. A levy well below the range for a comparable building deserves a question.
Fourth, the levy arrears report. A body corporate where 15 to 20 percent of owners are in arrears is a body corporate that will face cash flow pressure before the reserve fund does.
These four documents will tell you more about the building's financial health than the brochure ever will. They are all available on request. They cost nothing.
The buyers who read them are the ones who avoid the special levy that arrives on 30 days' notice. The buyers who do not are the ones who find out about the roof replacement the same week the invoice does.
Berman Brothers Group has been developing on the Atlantic Seaboard for over 33 years. Across that time, the buildings that have compounded their value and the buildings that have degraded have been separated by fewer variables than most buyers assume. Location matters. Design matters. But the variable that consistently sorts the top of the market from the middle is how the building is governed and how it is funded.
The reserve fund is the number that tracks both. It is the number that tells you whether the body corporate is being run to standard. It is the number that tells you whether the special levy is coming or not.
It is the most important number in the purchase. And it is one of the easiest to find.
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Paul Berman is a co-founder of Berman Brothers Group, which has been developing on the Atlantic Seaboard for over 33 years. Myth vs Fact is BBG's monthly series cutting through the assumptions buyers most often bring to the Atlantic Seaboard market. For the full Q1 2026 market read, see the Boardroom Quarterly Executive Brief.
Continue reading: Governance Is Part of the Product: Reading Conduct Rules Before You Buy is the companion piece to this article, covering how body corporate authority shapes what an apartment can actually do.
