There are a few things that a prospective buyer should know before signing an offer to purchase a sectional title unit, says Mandi Hanekom, operations manager of the sectional title finance company Propell.
A sectional title scheme consists of the following:
units or sections (which are individually owned and registered in the name of the owner),
the common property (which is owned in undivided (non-specific) shares by all the owners)
and exclusive use areas (portions of the common property that a specific owner has an exclusive right to use, but which is not owned by that owner).
Common property includes the gardens, driveway, carports or parking bays, leisure facilities such as a pool or clubhouse as well as the external (outer) walls and roofs of the buildings which house the sections.
An example of an exclusive use area is a carport and parking bay (you don't own it, but you are the only one who is allowed to park there).
Once someone becomes the registered owner of a section (in other words, when the transfer of the property is registered in the deeds office), that owner automatically becomes a member of the body corporate of the scheme. The body corporate is responsible for enforcing the rules and managing the common property for the benefit of all owners.
Once a year, the members of the body corporate approves a budget for the upcoming financial year. The trustees then raise a levy which is payable by every owner on a monthly basis; in this way, every owner contributes to the expenses of the body corporate.
The budget of the body corporate relies heavily on all members paying their levies on time and in full so that the body corporate can meet its financial requirements.
"If this is not done the body corporate runs into financial difficulties. There are solutions such as finance through a company like Propell, who assist bodies corporate in getting the financial situation back on track, but ideally the body corporate should be solvent and efficiently run," said Hanekom.
Without proper budgeting, the body corporate will not be able to pay its bills nor will it be able to keep the building and facilities in good condition. This leads to the building looking run-down and possibly losing value.
The types of levies are split into different categories: ordinary levies, calculated in accordance with the approved budget, and special levies, which are raised to cover expenditure that has not been approved in the budget (for example, if a lift breaks down and has to be fixed urgently).
New owners become liable for the pro rata payment of both ordinary and special levies from the date of registration of transfer.
For example: if owner A has an obligation to pay R1 000 a month towards ordinary levies, and is paying off a special levy of R24 000 over 12 months (in other words, another R1 000 per month is paid towards the special levy), then new owner B is liable for the R1 000 ordinary levy and R1 000 special levy from the date that he becomes owner of the section in question.
"It's important to note that owners should never withhold levy payments if they are unhappy with certain situations or the behaviour of certain trustees or owners.
This is the lifeblood of any scheme, and withholding payments just leads to additional administration and bad feelings among other owners who do pay their levies on time. It is also important, if you are buying, to check the financials of the body corporate, which ordinary and special levies are payable in respect of the unit you are buying and whether there is a chance that a special levy will have to be called for in the near future," said Hanekom.
The rules that govern a sectional title scheme are the prescribed management rules and conduct rules. Management rules are there for the efficient running of the sectional title scheme and cover administration, accounting, insurance, elections, meetings, budgets, levies and collection. Conduct rules are there to govern the behaviour of owners and tenants and usually cover:
Pets in the complex - the scheme might not allow animals, and the buyer must not assume that this will be allowed or that his type of animal is accepted.
Refuse disposal - some complexes have specific disposal procedures such as differentiating between recycling and normal wet refuse, they will also have certain days that the refuse should be taken out.
Vehicles and parking areas are often contentious issues. There are usually allocated spaces, and owners and visitors cannot park in areas that are not for their use.
Alterations to units - this is not allowed unless the permission to do so has been granted by the trustees. No changes may be made to common property and if the alterations to a unit affect the common property, they cannot be carried out.
Signs or notices on buildings are not allowed unless the trustees have given permission for them to be displayed. This would include for sale or to let signs; and
Laundry may not be hung in areas not specifically allocated for this use. Owners often hang laundry out to dry on balconies, not realising this is an infringement of conduct rules.
"Living in a sectional title scheme can be a good proposition if the scheme is run well and has a healthy, thriving environment. The sharing of expenses such as security and lifestyle items such as swimming pools or gyms also make it a good option if this is what you are looking for. You need to make sure, though, that you are able to live within the constraints and can stick to the rules in order to live with neighbours harmoniously," said Hanekom.
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