If you’ve spotted a Reserve Fund Levy listed on your invoice and are wondering what it’s all about, you’re not alone. It’s one of the most common queries we get from homeowners in sectional title schemes and it’s an important one. Let’s break it down in simple terms.
What is a Reserve Fund Levy?
A Reserve Fund Levy is an amount collected from owners in a community scheme (like a complex or apartment block) to build up a separate savings fund. The official term for this is a reserve fund, and it’s used to cover the cost of major repairs, replacements, and unexpected big-ticket maintenance projects that may come up over time.
What does the Reserve Fund pay for?
Reserve funds cover planned, large-scale maintenance and unexpected capital expenses, including things like roof replacements, waterproofing,general repainting, repairs and maintenance to the complex, elevator or gate motor repairs and replacing communal assets like fencing, pumps, or lighting systems.
Rather than paying a large lump sum all at once, the Reserve Levy helps homeowners plan and save slowly over time.
How long will I need to pay the Reserve Levy?
In most cases, the reserve levy is ongoing. This is because buildings age, and maintenance never really stops. Having an ongoing reserve levy is part of responsible scheme management and ensures your property stays safe, functional, and retains its value over the long term.
As there is no fixed end-date, the reserve levy becomes part of your monthly contribution to the community scheme, just like your administrative levy, which covers day-to-day running costs.
How is the Reserve Levy amount decided?
Reserve levies are based on the key factors. The first is the Maintenance Repair and Replacement (MRR) Plan. Every community scheme must have a 10-year maintenance plan that outlines expected future repairs and upgrades.
The second factor is the annual budget, which is reviewed and approved at the Annual General Meeting (AGM). It includes expected reserve fund contributions based on the MRR plan.
Finally, the law plays an important part too. According to the Sectional Titles Schemes Management Act (STSMA), a reserve fund must be maintained at least 25% of the scheme’s total annual administrative fund. If the reserve fund balance drops below this threshold, the body corporate is legally required to increase contributions.
This is good news for homeowners as it means the complex is being run and managed proactively, not reactively. A well-funded reserve protects your investment and reduces the risk of unexpected special levies that can put a dent in your finances. It also reflects strong governance, which matters when it comes to the value of your property and the desirability of your community.
At FMS Property Managers, we are here to make property ownership easier and clearer for you — every step of the way. If you have any questions about your reserve levy or the maintenance plan for your scheme, your portfolio manager is always happy to help.
