Buying a property might involve some delightful surprises – maybe you’ll discover charming wooden flooring under a tired old carpet in your new home. Get it reconditioned, and you save yourself the expense of a new carpet. But a less pleasant surprise is that your home loan payments aren’t the only regular expense that comes with home ownership. Rates or levies are among them – but do you know the difference? Whether you pay rates or a monthly levy is determined by the type of home you buy.

Rates

Rates apply to free-standing homes and sectional titled properties alike. They are payable directly to the municipality every month. They cover land taxes and services that the municipality is responsible for: sewerage, water, roads upkeep, electrical infrastructure, streetlight maintenance and refuse collection.

Rates are calculated according to the market value of the property, including any buildings on the site or improvements made. South Africa’s Constitution gives municipalities the power to value and rate property in their jurisdiction, and all owners of rateable property are liable for the payment of rates. Rates can apply to land even if there are no buildings on it. The formula for calculating rates is to multiply the market value of the property by the percentage that the municipal council has set.

Levies

On top of their rates, property owners in a sectional title establishment, like a townhouse complex, a cluster development or block of flats, are liable for a monthly levy, paid into the bank account of the body corporate. The body corporate is made up of all the unit owners in any sectional title development, but the day-to-day running and maintenance of the complex is handled by trustees. Body corporate members elect the trustees at an annual general meeting, and they should act in the interest of the body corporate as a whole.

The levy does not include your portion of the property rates, so you will need to pay this individually. Your levy covers the costs of security, cleaning, repairs and maintenance of all common areas, and building insurance coverage.

Levies are strictly meant for the upkeep of common property within a sectional title development. They do not extend to the maintenance inside each unit; expenses like repainting the inside of the home need to be paid by the owners. Sometimes, a sectional title development can raise a special levy on top of the regular levy, to take care of important projects – such as painting the complex and outside of the units, security upgrades, or adding features like a swimming pool or clubhouse. 

What’s the difference?

The main difference between rates and levies is what they don’t cover, and so falls under your responsibility. If you buy a sectional title property, after paying your levy each month you only need to worry about repairs and maintenance to your own unit on the inside. Building insurance, repairs, upkeep and cleaning of the common areas, garden services and security are all the responsibility of the trustees, using the body corporate money paid through levies. In a free-standing home, you pay those costs directly.

If you buy a free-standing home in an estate, all expenses including insurance must be covered by you directly. It’s worth your while, in this case, to check what is and is not included in the levy with the estate’s homeowners’ association. This will usually involve a monthly levy, but it allows you to take action as a collective on issues like security, refuse collection,  maintenance of roads, parks, electrical infrastructure and streetlights.

Did you know that on average, Nedbank pays out around R1.5 million a month in cash back on home loans? In 2024, we paid out more than R18.5 million in cash back on home loans. For an affordable home loan tailored to your circumstances and value-added extras like up to R20,000 cash back and a 50% discount on your attorney bond registration fees, choose the bank that’s best for your money.