This means that properties are part of a community, where individuals own their own apartment or house but share common areas, e.g. driveways, gardens, swimming pools, corridors, gardens, lifts (elevators), entrance foyers, parking areas, outer walls, foundations and the roof. In South Africa, a sectional title development is called a ‘unit’ and an individual property is called a ‘section’; to avoid confusion, however, developments will be referred to as ‘schemes’ and individual properties as ‘properties’.
Parts of a scheme are sometimes designated as ‘exclusive use areas’. These include gardens, patios, parking bays, garages and storerooms. If this is the case, you don’t own the area concerned but have exclusive use of it. Under the terms of the 1986 Act, an owner can sell the use of an exclusive use area to another owner in the scheme but not to an outsider.
The common property of a sectional title scheme is controlled and run by the scheme’s ‘body corporate’ – the collective name given to all of the owners of properties in a scheme. But the everyday running of the scheme is entrusted to ‘trustees’, who are appointed by the body corporate. People familiar with Spanish urbanisations will recognise this way of doing things: residents of a group of apartments and/or town-houses appoint a committee with a president (from their own number) to run common affairs.
Trustees are almost always owners of properties in a scheme. The minimum number of trustees in each scheme is two, but the Act doesn’t specify a maximum number. To be a successful trustee, you should have knowledge of at least some of the following (in which case you may save the scheme money on professional fees): the law, accountancy, electrical and mechanical devices and problems, bookkeeping, and general administration. Trustees often receive no payment for their work (except expenses), although the body corporate will sometimes agree to pay a trustee or trustees.
Major decisions concerning sectional title schemes are made by the body corporate at an annual meeting, usually called the Annual General Meeting (AGM), or at a Special General Meeting, presided over by the chairman of the trustees. These gatherings are held to approve budgets, appoint trustees, and consider changes to the rules (provided that these aren’t contrary to the intentions and spirit of the Sectional Titles Act). Discussions on these occasions are sometimes lively, occasionally confrontational, and all members of the body corporate are entitled to vote (unless they’re in arrears with fee payments or in serious breach of the rules). Unless otherwise decided, an individual owner’s voting power is determined by his percentage ownership of the entire scheme (for example, he might own more than one apartment or town-house) – known as his Participation Quota (PQ).
Running a large sectional title scheme can be complicated and time-consuming and, unless the body corporate is particularly well supplied with people with a wide range of specialist knowledge and experience, it can prove impossible to do successfully. As a result, some bodies corporate appoint a managing agent to carry out some or all of the work – usually a company that specialises in sectional title administration. A managing agent must be registered with The Estate Agents Board and hold a fidelity fund certificate issued by the Board.
The managing agent sends out monthly statements of work and accounts, carries out bookkeeping, recovers unpaid debts, arranges quotes for maintenance and repairs, and helps the trustees with the many tasks involved in administering the scheme. A good managing agent can save a body corporate a lot of time, trouble, stress and expense. On the other hand, a frequent criticism of sectional title schemes is the low standard of managing agents.
Payment for the administration and running of a sectional title scheme is shared among the owners. Costs incurred include insurance premiums, repairs and maintenance charges, the wages of cleaning, maintenance and gardening staff, and water and electricity used on the common property. These are paid for by a monthly levy, which every owner must pay. Any costs incurred in the upkeep and maintenance of exclusive use areas are recovered from the user of the area.
As well as dealing with these expenses, the body corporate must establish a fund to pay for future maintenance and to cover unexpected expenses. The Sectional Titles Act doesn’t specify a size for this fund and doesn’t allow any part of it to be refunded; any surplus must be used to subsidise future levies or to improve the common property. In an emergency, the trustees can impose a special levy to cover unforeseen expenses.
Before every AGM, the trustees prepare a budget for the following year and this determines the size of the levy. The budget is sent to all members of the body corporate before the meeting for their consideration and discussed and approved at the meeting. Once this is done, the total cost is divided into monthly amounts and split among owners according to their PQ.
The Sectional Titles Act requires the body corporate to ensure that the buildings are insured for their replacement cost. This insurance must cover all properties and improvements to the common property but it covers only buildings; individual owners must insure their contents. The premiums are included as part of the monthly levy.
Owners in a sectional title scheme must obey common rules. If an owner fails to maintain his property or exclusive use area, the body corporate can carry out the necessary maintenance and repairs, and charge the owner. A body corporate is even allowed to apply to the Supreme Court for an order instructing an owner to comply with a scheme’s rules. Most disputes, however, are settled without recourse to such measures: it’s in the interest of all owners that the scheme runs smoothly.
The advantages of owning a community rather than an individual property usually include:
- Increased security;
- Lower property taxes than detached homes;
- A range of community sports and leisure facilities;
- Community living with lots of social contacts and the companionship of close neighbours;
- No garden, lawn or pool maintenance;
- Properties are often situated in locations where owning a detached home would be prohibitively expensive, e.g. a beach-front or town centre.
The disadvantages of community properties may include:
- Excessively high community fees (levy);
- Restrictive rules;
- A confining living and social environment and possible lack of privacy;
- Overuse of communal facilities, especially in a large section or at peak periods: a large swimming pool won’t look so big when 100 people are using it, and getting a game of tennis or booking a fitness room may be difficult;
- Noisy neighbours;
- Limited living and storage space;
- Limited covered or secure parking (or insufficient off-road parking);
- Time-consuming and stressful administrative duties if you’re a member of the body corporate (critics of sectional title schemes argue that it’s impractical for ordinary home owners to manage often multi-million rand schemes themselves, in their spare time);
- Acrimonious owners’ meetings, where management and factions may try to push through unpopular proposals (sometimes using proxy votes).
If you’re planning to live permanently in a scheme, you should avoid buying in a section with a high percentage of rental units, i.e. units that aren’t owner-occupied, as these they may be filled with rowdy holidaymakers and the owners may be unconcerned with the running of the section.
Before buying a sectional title property, you should check (or ask your lawyer to check) the following:
- That the seller owns the property he claims to own by asking the trustees to show you a copy of the registered section plan. You should also check the exclusive use areas to which you will be entitled.
- If the section has been extended or altered, that the work had the requisite consent and has been registered;
- Whether a Section 25 Right To Extend The Scheme has been registered, meaning that the developer has reserved the right to add extra buildings or extend existing ones. A Section 25 Right is quite rare, but you should know about it if it exists, as it might change the nature of the scheme you’re thinking of buying into.
- The condition of the common property (e.g. brickwork, paintwork, plaster, gardens, driveways, lifts, swimming pool). If these are in poor condition, it’s a sign of poor management and high future expenses.
- Whether satellite TV is included. If not, it can be difficult or impossible to obtain agreement to introduce it and you cannot install your own dish.
- How good the security is;
- The rules of the scheme. Is there anything you would find difficult to comply with, or don’t want to comply with?
- The monthly levy. You should also ask to see a copy of the latest audited accounts, paying special attention to the financial reserves for future maintenance and repairs. A healthy reserve fund is often a sign of a well run scheme.
- If you’re planning to buy an apartment above the ground floor, whether the building has a lift. Note that upper floor apartments are both colder in winter and warmer in summer and may incur extra charges for the use of lifts. On the other hand, they offer more security than ground floor apartments. An apartment that has other apartments above and below will generally be more noisy than a ground or top floor apartment. Under-roof apartments may also have temperature control problems (hot in summer, cold in winter), although they enjoy better views. If the building has lifts, check whether they’re covered by a full maintenance contract, as lift repairs can be very expensive.
- Whether there’s any pending legislation against the body corporate.
- You may also wish to check on your prospective neighbours!
SURVIVAL TIP If you’re planning to buy a community property, it’s important to ensure that it’s well managed and that there aren’t any major problems with the common property. If there are, you could be liable to contribute towards the cost of repairs, which could run into many tens of thousands of rand.