In the realm of sectional title properties, service charges represent a crucial aspect of maintaining and managing shared spaces and amenities. These charges are levied upon unit owners to cover the costs associated with upkeep, repairs, and various services provided within the development. Understanding the scope of service charges and their legal underpinnings is therefore essential especially for people living within developments with common spaces.
Defining Service Charge
Service charge, as defined by the Sectional Properties Act, 2020 encompass all expenses incurred in the maintenance, repair, and management of common property (Section 9(1) of the Act). Common property refers to all areas not contained within individual units, including hallways, lobbies, elevators, gardens, swimming pools, and other shared facilities.
Purpose and Scope of Service Charge
Service charge serves a multifaceted purpose within developments and is primarily intended to cover the costs associated with:-
(i) Maintaining and repairing common property: This includes regular upkeep, routine maintenance, and addressing any damage or deterioration to common areas.
(ii) Providing essential services: This encompasses services such as garbage collection, security, water supply, electricity for common areas, and pest control.
(iii) Administering the body corporate: This includes expenses related to management meetings, record-keeping, legal fees, and insurance for common property.
(iv) Establishing a sinking fund: This fund serves as a reserve for future repairs, maintenance, and renovations of common property.
Legal Basis for Levying Service Charge
Section 9(1)(a) of the Act empowers the corporation to levy service charge on unit owners, while Section 10 outlines the procedures for determining and collecting these charges. Additionally, the Sectional Titles Regulations (Legal Notice No. 214 of 2021) provide further guidance on the calculation and collection of service charge.
Components of Service Charge
Service charge typically consists of two main components:-
(i) Fixed charges: These charges are fixed amounts that cover the ongoing costs of maintenance and administration.
(ii) Variable charges: These charges fluctuate based on actual usage or consumption of services, such as water or electricity, within the common areas.
Transparency and Accountability in Service Charge Administration
A corporation as the body mandated to collect service charge is obligated to maintain transparency and accountability in the management of service charge collected from members.
This includes providing detailed breakdowns of service charge expenses to unit owners and holding regular meetings to discuss budgetary matters. Unit owners have the right to inspect the financial records and raise concerns and/or give recommendations regarding service charge expenditures.
Dispute Resolution Mechanisms
In the event of disputes arising from service charge administration, levying or management, the Act establishes a framework for resolution. Unit owners may raise grievances with the corporation and if unresolved, the matter may be referred to a mediator or arbitrator. Ultimately, disputes can be escalated to the High Court for adjudication.
Conclusion
Service charge plays a pivotal role in ensuring the proper maintenance, upkeep, and administration of developments. By understanding the legal basis, purposes, and components thereof, unit owners can actively participate in the financial management of their shared common spaces and contribute to the harmonious functioning of their estates.
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