Your Guide to Buying in a Sectional Title Scheme
Unprecedented lending conditions have resulted in the ultimate buyers’ market. For those looking to climb the property ladder, now truly is the time to take the leap. Sectional Title properties remain a popular choice for investors – but only if you know what to look for. Pearl Scheltema, CEO of Fitzanne Estates, shares her tips for buyers looking to invest in this type of property.
Condition of common use areas
When you buy in a Sectional Title Scheme, you get access to a much wider range of amenities than you would if you purchased a full title property for the same price. This value for money is a large draw, but only when well-managed.
Amenities can include public spaces like pools, clubhouses, fitness centres, as well as enhanced security. “Sectional Title developments generally have good perimeter and entrance security, which is usually included in the monthly levies and allows for a greater sense of safety,” Scheltema explains. “Take note of the conditions of the shared amenities – is the pool well taken care of, are the communal gardens neatly maintained, and does the clubhouse offer what was promised? These public areas can offer early warning signs of a Body Corporate that’s not doing its job.”
You will be partially responsible for the maintenance and repair of these facilities via your monthly levy. “If the complex is badly maintained, that is very likely to have a negative effect on the resale value of your home in the future, and in the meanwhile might mean that you have to pay a hefty special levy to cover some major repairs or refurbishments,” says Scheltema.
Experienced and qualified Managing Agent
Having a good, qualified Managing Agent for the Scheme also alleviates these worries, as you can feel confident that the important details are taken care of, Scheltema adds: “A Managing Agent shouldn’t be an extra burden for scheme owners – rather a sigh of relief, knowing their investment is now in safe, professional hands!”
Management and Conduct Rules
As an owner of a Sectional Title property, you become part of the collective of owners of common areas. This gives you access to these areas, but also means that you must abide by the rules to make use of them.
The Management Rules cover the way in which the Sectional Title Scheme is managed and deals with the appointment of Scheme Executives, how to run meetings, voting at these meetings, elections, duties of the trustees, etc.
Conduct Rules set out how the people living in the Sectional Title should behave with regards to common property, whether pets are allowed, refuse removal, use of common areas, parking of vehicles, maintenance of the aesthetics of the building, the use of gardens (exclusive use areas), satellite dish installations, etc.
These rules typically also apply to any expansions or renovations to your own section. You’ll need to know exactly what the rules are and how they affect your rights within your own property. “Don’t take the word of the sales agent when they tell you where you can park or whether or not you may keep pets. Always get the Conduct and Management Rules in writing,” Scheltema cautions.
This ensures you know what’s expected of you and allows you to decide whether the rules match up to what you want to do. Remember that Sectional Title Schemes only work when all members work together. Knowing what’s required of you makes this much simpler.
“As a potential buyer, you should ask for a copy of the most recent audited financial statements of the Body Corporate and the minutes of the most recent AGM, especially the chairman’s report,” advises Scheltema. “Buying a sectional title unit means buying into the assets and liabilities of the whole scheme. If the levies are badly in arrears or the complex does not have a substantial reserve fund for unexpected expenses, it could be an issue.”
Scheltema further adds: “It’s a good idea to ask to see the most recent levy account as proof that the levy you’re being informed about is correct. Are there any other charges payable? There might be additional costs such as DStv connection charges, parking fees or special levy contributions.”
It can be difficult to navigate all the rules set out by schemes and deciding whether a property is in the right Sectional Title Scheme for it to be a good investment isn’t always easy. “In an ideal world, anyone would buy in a Sectional Title Scheme that is well run, financially sound and one that has no major structural defects or maintenance concerns. However, many prospective buyers have only the faintest idea what Sectional Title ownership really involves, as well as the restraints and obligations it imposes,” Scheltema says.
“The best advice I can offer a property investor looking at ownership in a Sectional Title Scheme, is to invest in Scheme Executive Training,” Scheltema concludes. “Such training ensures investors are equipped to make the right decisions when it comes to Sectional Title Schemes, through hands-on guidance, accredited courses, and actionable advice.”