Four must-ask questions before buying into a ST scheme
Looking to buy a home? Chances are you have been looking at sectional title units – the rising costs of maintaining properties and the added security sectional title units usually offer are just two of the reasons these property types are so popular. But do you fully understand what you are buying into?
Mandi Hanekom, operations manager of the sectional title finance company Propell, lists the questions you should ask before signing an offer to purchase.
What am I buying?
A sectional title scheme consists of the following: units or sections (the homes, 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).
What this means: 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 you becomes the registered owner of a section (in other words, when the transfer of the property is registered in the deeds office), you automatically become 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.
How much will I need to budget for monthly?
Without proper budgeting or timely levy collection, 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).
Take note: New owners become liable for the pro rata payment of both ordinary and special levies from the date of registration of transfer.
Before making your decision to purchase check the financials of the complex. Make sure you are aware of which ordinary and special levies are payable in respect of the unit you are buying. Also find out whether there is a chance that a special levy will have to be called for in the near future.
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.
Before signing an offer to purchase it is important that you familiarise yourself with the management and conduct rules and ensure that you will be able to comfortably live in the complex – it is difficult to change rules once you’ve bought into a scheme. Things that could be covered by a scheme’s rules may include a variation on the following points.
- Pet policy – The scheme might not allow animals. You should not risk any assumptions here, not even that your type of animal will be 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. This becomes important if you are thinking of enclosing a balcony to serve as a home office, etc. Make sure that all your needs, current and in the reasonable future, can be met by the unit you are looking at purchasing.
- 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,” advises Hanekom.