An introduction to investing in a Sectional Title Development Scheme

So you have your eyes on a gorgeous townhouse within a secure complex or security estate, but have no idea what to expect from buying into a sectional title development?

Essentially, when you buy into a sectional title development you are buying a section of the development, for example,  a flat, apartment, townhouse or a semi-detached home.
You will also co-own shared common sections such as swimming pools, communal gardens, driveways, corridors, entrance foyers and recreational facilities. You may also have the rights to exclusive areas, parts of the common sections, which are for your use exclusively, such as parking bays, patios, garages and private gardens.
There are many advantages of investing and residing in a community managed  by the Sectional Title Schemes Management Act, but it is important to be aware of what this means before you make your decision.

In terms of the Act, sectional title developments are  legal entities that must be managed by a body corporate. The body corporate oversees the management of the development and for this they charge levies which must be taken into consideration when calculating  the affordability  of the property you wish to purchase. Rates are also  payable when you purchase in a sectional title development scheme and this must also be budgeted for.

Body corporates are responsible for ensuring that the financial, physical  and administrative needs of the scheme are met. They are made up of the owners in the development who elect trustees and directors at their annual general meetings to manage the day-to-day operations of the scheme. They also set scheme rules in place and ensure that residents adhere to them. These trustees and directors do not draw an income for the work that they do.

It is important to note, that should you buy into a sectional title development within a larger community such as  a gated, security estate, you will also have to pay levies to the homeowners’ association, which manages the estate. The homeowners’ association is also a legal entity that is governed by the Companies Act.
In cases where the sectional title development is very large, a property management agency is sometimes appointed to manage their affairs. Managing agents specialise in sectional title administration and are registered with the Estate Agency Affairs Board. They take over the job of sending out monthly statements of work and accounts, recovering unpaid debts and the like, thereby saving the body corporate time and expense. They also arrange and run  the trustees and directors’ meetings according to the Sectional Title Act.

Before you put in an Offer to Purchase on a sectional title development, Tyson Properties Management advises you to check  the following:

•    What is the condition of the common property? If the paint is flaking, the gardens are shabby and the complex looks neglected it could be a sign of poor management.
•    Ask to see a copy of the scheme’s financial statements. This will give you a good idea of how the levies are being managed and spent.
•    Ask about the monthly levy due and how often it increases. New owners are also sometimes required to pay  a once-off fee into a levy’s tabilisation fund when they    
        purchase the property. This fund is set aside for special projects and also helps ensure that the levy increases are kept within the level of inflation.
•    Get a copy of the scheme rules and see how it will impact you. If pets are not allowed and you have one, this could seriously impact your decision of whether to buy or not.
•    Confirm which section you are wanting to buy and whether it includes any exclusive use areas. It is important to know what falls under your area of responsibility and what
        the body corporate is responsible for. 

The benefits of living in a sectional title development scheme are numerous. From being part of a safe, secure community to having access to gardens and recreational facilities that are maintained for you. However, these benefits come at a monthly cost. Having to abide by various rules and requiring trustee permission to make changes to your home may cramp your style and not be something you wish to contend with. 

So be sure to know exactly what you want and are ready to embrace both the pros and cons of being of being an owner in a sectional title scheme
Tyson Property Management focuses on ensuring that the bodies corporate and homeowners’ associations under their management are run and managed honestly and that they comply with legislation. They offer the following services:

•    Daily administration
•    Annual budgets
•    Levy Calculations
•    General accounting functions
•    Management of property insurance portfolios
•    Organisations of trustees and directors’ meetings and document management.

For more information, please contact our property manager Claudine Double on 031 583 2700