Sectional Title offers your lifestyle benefits
Text: Angie Redmond. Article from the October 2012 issue of SA Real Estate Investor.
Get your foot In the door
Sectional title units are often more affordable than full title cluster homes, but generally offer similar security and lifestyle benefits, according to Adrian Goslett.
Aside from the fact that the prices of sectional title units are generally cheaper than full title homes, there are other aspects that bring down the cost to the homeowner once they have bought a sectional title unit. In most cases, homeowners are only responsible for the maintenance of the interior of their unit, while maintenance costs for the exterior of the property are generally for the body corporate account. Additionally, charges for resources such as water and electricity are shared among the homeowners living in a sectional title complex, which means the costs are normally lower than that of a freestanding property.
“Sectional title units are ideal for first-time buyers or those eager to get their foot onto the first rung of the property ladder. However, it is important for all buyers looking to invest in these schemes to apply the same golden principles they would to buying any property. Firstly, do the necessary research and secondly, buy in the right location,” says Goslett.
Wide appeal
Demand for sectional title residential properties remains fairly buoyant, appealing as they do to a wide cross-section of the community. At one end of the spectrum are young people, often newlyweds starting out in life, and at the other elderly couples downscaling from the family home and seeking lower running costs coupled with comfort and security.
Then there is the parental group, who invest in a sectional title block to provide their children with accommodation during their university studies, while keeping an eye on potential capital returns.
Of course, not all sectional title properties are small, relatively inexpensive apartments. There are townhouse developments and, in the luxury market, properties can cost as much as R50 million, PGP’s national sales executive John Herbst points out. Herbst adds that the popularity of this type of property is illustrated by the fact that sectional title sales constitute a high percentage of all residential units sold in Johannesburg. Owners appreciate the security and convenience offered; many have access control and the apartment blocks are often situated within fenced communities offering amenities such as clubhouses, restaurants, swimming pools, tennis courts and other attractions. They are ideal for the ‘lock up and go’ adherent.
Legal issues
There is no need to be nervous of a sectional title purchase. South African legislation is internationally recognised. First promulgated in 1971, it is very well established today. lt was drafted in line with international precedents, specifically that of New South Wales.
New legislation has recently been drawn up, says attorney Maryna Botha of Smith Tabata Buchanan Boyes, in terms of which:
- The scheme management provisions have been removed from the current Sectional Title Act and are contained in a new Sectional Title Schemes Management Act 8 of 2011; and
- the Community Schemes Ombud Service Act 9 of 2011 establishes an Ombud Service for the resolution of disputes in all community schemes (including schemes for retired persons).
Both Acts have been assented to, adds Botha, but neither are yet in operation, although this is expected by the second half of this year.
Prior to the introduction of sectional title schemes, non-full title properties such as apartments were administered under the Shareblock Control Act. “This was part of the Companies Act,” recalls Mike Morey, managing director of PGP’s Property Management Services, which manages some 135 schemes encompassing 5 500 units. “Shareblock schemes have a board of directors as opposed to a body corporate; they still exist but they have become much less popular. They are something of a dying breed and a number are going through the legal process of converting to sectional title.”
Most, if not all, communal building developments (apartment blocks etc) are governed by the Sectional Title Act. Freestanding units in developments are commonly registered by the developer as Home Owners’ Associations either established in terms of Land Use Planning Ordinance with a board of trustees, or registered as non-profit companies in terms of the Companies Act with a board of directors.
“Many sectional title developments offer sound value for money and a well run complex can offer a sound return on investment over the long term.”
An important difference from a buyer’s perspective is in terms of restrictions, ie in both cases owners pay levies for the upkeep of common areas etc, but owners in a sectional title scheme are restricted under the prescribed and registered rules administered by the body corporate in what they may do (alterations, improvements, keeping pets, gardens and so on).
Read the rules
According to Goslett, a vital part of the research required when purchasing into a sectional title scheme is to obtain a copy of the body corporate rules and regulations and go through them. “Buyers can obtain a copy of the body corporate rules from the estate agent marketing the property, and should go through the document before signing a sales agreement.
These rules govern the owners within the confines of the scheme and deem what the homeowner is allowed to do in the perimeters of that scheme once they purchase the property. The rules will deal with general conduct in and around the complex as well as specific issues such as pet ownership.
The regulations of the scheme are an intricate part of the decision-making process, as buyers will need to agree with the rules and abide by them in order to avoid complications,” advises Goslett.
The body corporate can change conduct rules by drafting a special resolution and inviting all owners to a general meeting at which they will vote on the proposed amendments.
When the Ombudsman is in place, one will be able to approach the Ombud to change a rule deemed unreasonable.
Become involved
Obviously the trustees appointed by the body corporate call the shots in terms of house rules, conduct rules and so on; so should one make a point of being appointed a trustee? “I generally encourage anyone to become a trustee,” says Morey.
This can be particularly important if one is buying into a new development. Botha points out that the body corporate legally comes into existence as soon as the first unit in the scheme has been transferred.
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