Insights › Body Corporate & HOA

How much should a Johannesburg body corporate hold in its reserve fund under the Sectional Titles Schemes Management Act?

By Hennie Loubser, CA(SA), CFA, FPSA · 10 min read · Published 24 May 2026

The STSMA does not give a single number — it gives a formula. Here is exactly how to apply it to your scheme.

It is the question every newly elected trustee in a Johannesburg sectional title scheme eventually asks the managing agent: how much money should we actually have sitting in the reserve fund? The honest answer is that the Sectional Titles Schemes Management Act 8 of 2011 (the STSMA) does not give a single number — but it does give a precise formula, and Johannesburg schemes that ignore it tend to find out the hard way when a roof, a lift, or a 30-year-old plumbing stack finally lets go.

This article unpacks what the Act and its Regulations require, how the minimum contribution is calculated each year, and what an appropriately funded reserve looks like for a typical Johannesburg body corporate — whether you manage twelve units in Linden or two hundred in Sandton.

What the STSMA actually says about reserve funds

Section 3(1)(b) of the STSMA requires every body corporate to “establish and maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property”. That is the principle. The practical detail lives in Regulation 2 of the Sectional Titles Schemes Management Regulations, 2016, which sets a minimum annual contribution that the trustees must include in the budget put to the AGM.

Regulation 2 ties the minimum reserve fund contribution to the ratio between the reserve fund balance at the start of the financial year and the budgeted administrative fund for that year:

• If the reserve fund balance is less than 25% of the administrative budget, the minimum contribution to the reserve fund must be at least 15% of the total budgeted administrative fund contributions for the year.
• If the reserve fund balance is at least 25% but less than 100% of the administrative budget, the minimum contribution must be at least equal to the amount budgeted for maintenance, repair and replacement in the 10-year plan for that year.
• If the reserve fund balance is 100% or more of the administrative budget, there is no prescribed minimum — but trustees may, and often should, still contribute.

The rule is deliberately self-correcting: under-funded schemes are forced to catch up at 15% of the admin budget per year, while well-funded schemes are allowed to coast at the level the maintenance plan requires.

A worked example for a Johannesburg scheme

Take a hypothetical 40-unit complex in Bryanston with an administrative fund budget of R3,600,000 for the year (roughly R7,500 per unit per month in admin levies). The 25% and 100% thresholds work out as follows:

• 25% of admin budget = R900,000
• 100% of admin budget = R3,600,000

Now compare the opening reserve fund balance to those thresholds:

• Scenario A — opening reserve of R400,000 (below 25%). Minimum contribution = 15% × R3,600,000 = R540,000 for the year, or R1,125 per unit per month on top of admin levies.
• Scenario B — opening reserve of R2,000,000 (between 25% and 100%). Minimum contribution = whatever the 10-year maintenance plan budgets for that year — perhaps R650,000 if a partial roof replacement is scheduled.
• Scenario C — opening reserve of R4,000,000 (above 100%). No prescribed minimum, but if the 10-year plan still calls for spend in years 3 and 4, the trustees should keep contributing rather than draw the fund down to nothing.

The arithmetic is mechanical — what matters is that trustees do it openly, show it in the AGM budget pack, and minute the calculation.

The 10-year maintenance, repair and replacement plan

Regulation 2 cannot be applied in a vacuum: it assumes the existence of a written 10-year maintenance, repair and replacement plan (the MR&R plan), required by Prescribed Management Rule 22. The plan must cover every major capital item on common property — roofs, lifts, intercom systems, paving, perimeter walls, gate motors, pumps, the plunge pool pump room, fire equipment, external paintwork — and must set out, for each one, its expected lifespan, the cost of replacement, and the year in which money will be needed.

For most Johannesburg schemes a credible MR&R plan is prepared by a quantity surveyor or specialist consultant, refreshed every three to five years, and adopted by ordinary resolution at the AGM. The reserve fund then becomes a financial mirror of that plan: every rand contributed is earmarked against a known future obligation, not a vague rainy-day cushion.

What the reserve fund may — and may not — be used for

Reserve fund money is ring-fenced. It may only be spent on the maintenance, repair and replacement of common property and body corporate assets as contemplated in the MR&R plan, plus a narrow category of unforeseen emergency repairs to common property (subject to the limits in PMR 22). It may not be used to subsidise day-to-day running costs, settle municipal arrears, fund legal action against defaulters, or top up the administrative fund because levies have been set too low.

The fund must be held in a separate interest-bearing bank account in the name of the body corporate, and trustees who treat the two funds as interchangeable expose themselves personally — the STSMA makes non-compliance an offence and the Community Schemes Ombud Service (CSOS) has shown a clear willingness to make adverse orders against trustees who under-fund the reserve.

What “adequately funded” looks like in practice

The regulatory minimum is exactly that — a minimum. A scheme that only ever contributes 15% of admin budget will almost certainly find itself raising a special levy the first time a major component reaches end of life. Industry guidance from the National Association of Managing Agents (NAMA) and most of the established Johannesburg managing agencies puts a healthy reserve at somewhere between 25% and 100% of the annual administrative fund, depending on the age and complexity of the scheme:

• New schemes (under 10 years) — building still under warranty for many items; a reserve at 25% to 40% of admin budget is usually sufficient, provided the MR&R plan is being followed.
• Mature schemes (10 to 25 years) — first major refurbishment cycle approaching; aim for 50% to 75% of admin budget.
• Older schemes (25 years +) — multiple systems at or past end-of-life; 75% to 100%+ of admin budget, with active draw-down as planned works happen.

An older Joburg complex with original galvanised plumbing, a 1990s lift, and pre-RDP electrical reticulation that is sitting on a reserve of 20% of admin budget is, in our experience, an almost certain candidate for a six-figure special levy within five years.

Practical steps for trustees this financial year

1. Pull the latest audited financial statements and read off the closing reserve fund balance.
2. Check whether a current MR&R plan exists. If it does not, commission one — it is required by law and is the only defensible basis for a reserve fund budget.
3. Calculate this year's regulatory minimum using the three-bracket test above, and check it against the amount the plan says you need this year. Budget the higher of the two.
4. Disclose the calculation in the AGM notice pack so owners can see exactly why the reserve contribution is what it is.
5. Confirm the reserve fund sits in a separate, interest-bearing account in the body corporate's name.
6. Revisit the MR&R plan at least every three years, or sooner if a significant component is replaced ahead of schedule.

Doing all of this in the Mosaic Community Portal

Reserve fund management is exactly the kind of work that quietly absorbs trustee time and where small calculation errors quietly compound — which is why the Mosaic Community Portal has a dedicated maintenance plan and reserve fund module built in.

Trustees and managing agents can:

• Capture the 10-year MR&R plan line by line — every component with its category, condition, useful life, replacement cost and escalation assumption — so the plan is a live document rather than a PDF buried in a Dropbox folder.
• Run the Regulation 2 reserve fund calculator automatically. The portal compares the opening reserve fund balance to the administrative budget, applies the 25% and 100% thresholds, and shows the prescribed minimum annual contribution alongside the contribution implied by the 10-year plan — so the AGM budget pack can be defended line by line.
• Hold the reserve fund in a separate, dedicated bank account (the portal supports more than one reserve account per association where bigger schemes prefer to ring-fence individual projects).
• Automate the monthly transfer from the administrative fund bank account into the reserve fund bank account. Transfers are pre-authorised by trustees via OTP, executed directly through the bank, reconciled in real time, and written into a full audit trail — no more month-end reminders, missed transfers or hand-keyed EFTs.
• Reconcile reserve fund levy revenue against actual bank receipts, so trustees always know exactly how much of the budgeted reserve contribution has actually been collected and banked.
• Roll the plan forward at year end and re-run the Regulation 2 check in a single click, with every change captured in an event log for the next audit.

The result is a reserve fund that is calculated correctly, funded automatically, ring-fenced legally, and auditable end-to-end — without anyone having to remember to do it manually each month.

How Mosaic Community Services helps

Mosaic Community Services manages the full administrative and financial cycle for sectional title schemes — including the reserve fund calculation under Regulation 2, drafting AGM budget packs that show the working, ring-fencing reserve fund money in a dedicated bank account, and coordinating with quantity surveyors on the 10-year MR&R plan. Trustees see the numbers, owners see the rationale, and the scheme stays on the right side of the STSMA.

If your body corporate is unsure whether its current reserve fund balance is compliant — or simply realistic — we are happy to do an obligation-free reserve fund health check against your latest financials and MR&R plan. Contact the Mosaic Community Services team via the Mosaic homepage to arrange one.