South African homebuyers under pressure from rising living costs are increasingly filtering their property searches by levy amount before price.
But warns Just Property CEO Paul Stevens, it’s a shortcut that could be directing them straight into an expensive real-estate trap since below-market levies often mask financial trouble in a sectional title scheme.
“I understand why people do it,” he says. “When every rand counts, a low levy feels like a win. However, a levy that looks like a bargain should make you pause. Sometimes it means the scheme is well-run. Other times, however, it’s a sign that the numbers aren’t adding up, which means that the real bill is still coming.”
Why 2026 buyers are vulnerable
Rising municipal rates, higher insurance premiums, aging infrastructure, and increased security and compliance costs in 2026 have made affordability a focal point for buyers, he acknowledges. And as a result, a growing number are responding by prioritising low levies without understanding what those levies legally have to cover.
Calling it “false economy,” Stevens says this focus on short-term affordability ignores the long-term financial risk.
The hidden cost of ‘cheap’ living
“A low monthly levy shouldn’t be celebrated; it should be questioned,” he cautions.
“When a body corporate keeps levies artificially low - whether to attract buyers or keep owners happy - they’re not saving anyone money. They’re simply postponing the cost. And in property, delayed maintenance always comes back as a bigger, more painful bill.”
Two funds are mandatory
Under the Sectional Titles Schemes Management Act 8 of 2011 (STSMA), Stevens says that schemes must maintain two separate funds: an administrative fund for day-to-day operational costs and a reserve fund for long-term capital repairs.
The law also prescribes a formula, he adds: “If the reserve fund balance is less than 25% of the previous year’s annual administrative fund, the body corporate has to allocate at least 15% of that admin budget into the reserve fund every year.”
“A lot of people are shocked to learn that a 10-year maintenance plan is actually mandatory,” he points out. “If a scheme doesn’t have one, that’s a red flag because it means that the trustees aren’t planning ahead, and the costs will land on the owners sooner or later.”
The formula is not red tape, he stresses. “It’s there to stop schemes from collapsing financially. It forces trustees to plan for the big, predictable expenses - roofs, lifts, waterproofing, boundary walls - instead of scrambling when something breaks. When schemes bypass these requirements to maintain the illusion of affordability, a capital emergency will be inevitable.”
Special levies, bond rejections, and declining value
Deferred maintenance eventually becomes visible in the form of peeling exterior paint, rusting balustrades, potholes in internal roads, and malfunctioning access control systems – all signs that a levy is artificially low, he says.
Further, rising replacement costs are increasing concerns about underinsurance. “If a scheme is underinsured, owners could face a massive special levy after a fire, flood, or storm because the insurer will only pay out proportionally.”
Stevens says that the minute a roof leaks, a boundary wall collapses, or a lift stops working, an underfunded body corporate will have no choice but to trigger Prescribed Management Rule 21(3)(a), which empowers trustees to implement a special levy.
“Buyers who chose a property because of its cheap levy can suddenly end up with a mandatory lump-sum demand for thousands, if not tens of thousands, of rands.”
Nor do the financial consequences end there. Banks routinely request the last two years of audited financials and the scheme’s 10-year maintenance, repair, and replacement plan (MRRP), he says. “If the reserve fund is underfunded or the MRRP is missing, chances are that the bank will reject the buyer’s home loan application, even if the buyer has an excellent credit score.”
Poorly funded schemes also struggle in the resale market. “Properties take longer to sell, attract fewer buyers, and often achieve lower prices, so a scheme with an underfunded reserve fund is a serious resale risk,” he warns.
How to spot the trap before you sign
Stevens advises buyers to instruct their transferring attorneys or estate agents to obtain the following documents before signing an offer to purchase:
- The 10-year MRRP: Confirm that the scheme has a current, written plan that tracks the lifespan and replacement costs of major assets.
- The reserve fund ratio: Review the audited financials. A scheme that follows the law will always maintain its reserve fund balance between 25% and 100% of its annual administrative budget.
- AGM minutes: Check whether owners have repeatedly voted down necessary levy increases or whether special levies are being discussed.
- Arrear levy report: High arrears indicate cash-flow stress and portend future special levies.
- Insurance schedule: Ensure that the scheme is adequately insured for current replacement values.
“A healthy levy protects your home, your bond approval and your resale value,” Stevens says. “It’s one of the strongest indicators of whether a scheme is being responsibly managed or not. Choosing a home based purely on a cheap levy is penny-wise and pound-foolish. You’re not buying a number on a listing; you’re buying into a community’s financial health.”
What a healthy scheme looks like, according to Stevens:
- realistic levies aligned with actual running costs
- a funded reserve account
- a current 10-year MRRP
- transparent communication from trustees
- no pattern of rejected levy increases
- no history of repeated special levies
- adequate insurance cover
A final word to buyers: “South Africans are under pressure, and I get that,” he concludes. “It’s natural to look for affordability wherever you can. But a levy isn’t a discount - it’s a financial indicator. If you understand what it’s telling you, you’ll make a far better decision. And in this market, that really matters.”
