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Selling your sectional title unit? Pray the scheme has been well run

When a sectional title property is sold as a sale in execution, the municipality will be paid first if there are outstanding amounts on the rates and water accounts (which there usually are); the bank will be paid second and the body corporate third. The buyer at auction will have to take on settling the outstanding amounts if the proceeds of the sale do not cover the outstanding levies.

How outstanding accounts fall on bodies corporateanvil and debt falling on man

This is according to Michael Bauer, GM of property management company IHFM, who says shrewd buyers of properties at auctions will often ask bodies corporate to produce their levy and interest resolution.

“They must produce this as well as a resolution passed by the trustees on the interest charged on overdue levies,” he says. “Without proof of these resolutions the overdue levy account can be reversed and this, then, would be to the detriment of the scheme because funds in most cases must been written off.

“This is where it is imperative that the body corporate does everything ‘by the book’.”

Why the bank needs the seller’s documents toosafe in room

It’s obvious that sellers need to be up to date on their levy and municipal accounts, but they should also remember to give all the necessary documents from the body corporate on their unit to the estate agent; these papers are required by the bank to approve a bond or home loan for the prospective buyer.

Here’s what you need to watch out for when buying into a sectional scheme

The banks, too, will assess the financial status of the sectional title scheme before they will grant a bond to the buyer, and if the seller waits too long to request these, the bond approval process would be delayed.

Bauer says that when the banks look at the financials of the body corporate, they will check what is owed by the scheme, whether loans have been taken to cover accounts where there have been shortfalls in levies paid, and whether the scheme is being managed properly and is solvent.


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