Sectional Title: Doing your homework pays off

Sectional title ownership is, in some ways, more attractive than conventional title ownership but also more complex. This follows from the fact that when one buys into a sectional title scheme, you become part of a community living in close proximity, governed by legislation and rules and having financial and administrative obligations. There are therefore additional questions that sellers and purchasers in such schemes must address, such as;

• what are the monthly ordinary levies payable and what are the consequences if some owners do not keep their payments up to date? A purchaser should also ascertain if there are any special levies anticipated to be raised in the near future. Should an upgrade of the elavator installation be on the cards, for example, this may substantially impact on your budgeted liability for levies.
• make enquiries regarding the state of the financial affairs of the body corporate. If you are applying for a bond, the bank will also request documentation regarding the financial viability of the scheme.
• check the management and conduct rules that apply to the scheme to make sure you are happy to abide by them.
• was the section you are purchasing structurally altered? if so, get confirmation whether municipal and scheme rules were followed.
• check whether a right to extend on the scheme has been registered in favour of the developer, as this may impact on the future appearance and lay-out of the scheme.

Importantly, check whether the exclusive use rights (often gardens, parking bays and balconies included in the same agreement) are 'real rights', ie the rights to these areas are registered in the deeds office and owner holds seperate title thereto. These will also form part of the property bonded by the bank if a bank loan is involved and impacts on the purchase price. the other option is that rights to these areas exist by virtue of an agreement with the body corporate. In the latter instance the property seller will not have registered the title deeds to those parts of the property and the rights to use the areas will not become assets of the purchaser which the bank, when granting a loan, can include in the bond it registers over the property.

Article sourced in the Oct Real Estate Magazine & written by Smith Tabata Buchanan Boyes