When buying a sectional title, a person gains ownership of a specific segment or segments within the complex/development, together with a proportionate share of the common property. Townhouses, flats or apartments, and duet houses are all types of sectional title properties.
A sectional title scheme typically comprises three key components:
Owners’ sections: The individual houses or apartments within the scheme, owned and officially registered under the respective owners' names and delineated by the sectional plans recorded in the Deeds Office.
Exclusive use areas: Portions of the common property for which owners pay a levy to enjoy exclusive usage rights, such as parking spaces, gardens, storage areas, and balconies.
Common property: The remaining land area within the scheme, collectively owned by all sectional title owners, such as pools, communal gardens, driveways, and elevators.
Key considerations for sectional title property owners
A prospective or current owner of a sectional title property should be aware of some essential aspects relating to these properties:
- Membership in the Body Corporate
Upon acquiring a sectional title unit, you automatically become a member of the Body Corporate, the legal entity that manages common areas of the property. A monthly levy is payable to cover various services, including rules of conduct for residents, buildings insurance, security measures, cleaning, landscaping, and maintenance of communal spaces like gardens. Additionally, owners' levies cover the costs of water and electricity for shared areas.
- Exclusive Ownership
You enjoy full ownership of your unit, limited to the interior of your apartment or townhouse. Exclusive use areas, which are designated and linked to your unit, remain part of the common property. However, you as owner have the exclusive right to use such areas (such as a garden / parking / garage).
- Management
Sectional title schemes management is governed by the Sectional Titles Management Act (No 11 of 2011), which amended the original Sectional Titles Act 95 of 1986.
The management of schemes is guided by prescribed management rules and conduct rules. Management rules focus on efficient scheme administration, covering aspects such as accounting, insurance, meetings, and levy collection. Rules of conduct regulate the behaviour of owners and tenants concerning issues like noise levels, pet ownership, parking, and general conduct.
At the annual general meeting, trustees are elected by the body corporate to manage the finances and run the day-to-day affairs of the sectional title scheme.
Who is the managing agent, and do they have adequate fidelity cover?
Typically, trustees delegate scheme management to a managing agent. This agent is responsible for levy collection and must be an Estate Agency Affairs Board (EAAB) member. EAAB membership ensures funds are held in a trust account protected by the EAAB fidelity fund. The managing agent should hold fidelity insurance covering all employees handling scheme money.
While most sectional title policies cover fraud and theft by trustees and employees, the limits of such cover are often low. Trustees should discuss indemnity insurance at annual meetings, leaving the extent of coverage to the decision of the body corporate.
- Financial Obligations
The financial health of any scheme hinges on the timely and full payment of levies by all members each month. Unit owners are prohibited from withholding levy payments under any circumstances, even if they express dissatisfaction with management.
Failure to budget properly jeopardizes the body corporate's ability to meet its financial obligations. As a result, maintenance of buildings and facilities may be neglected, which could lead to devaluation of the units.
Levies are divided into three main categories:
- Monthly levies: These cover routine operational expenses such as staff salaries, and all members are required to pay them monthly. Rates and taxes for individual units and exclusive use areas are not included in these levies but managed through a separate account with the City Council.
- Exclusive use area levies: Owners of units with exclusive rights to specific areas are responsible for paying these levies.
- Special levies: These are reserved for larger expenses that were not accounted for in the annual budget. All unit owners are obliged to contribute to special levies as they arise.
- Insurance
Sectional title schemes typically have collective insurance policies covering the building's structure, while owners are responsible for insuring their unit's contents separately.
The Sectional Titles Act requires a body corporate to obtain insurance which covers buildings for their full replacement value, not the market value. Often, trustees simply adjust insurance levels annually based on inflation, potentially leading to under- or over-insurance over time. If a scheme consists of more than approximately ten units, a professional valuation every two to three years is advisable.
- Assessment of the Complex
Before purchasing a sectional title property, you should thoroughly evaluate the condition of the complex, including buildings, common areas, and amenities. Inquire about the maintenance history, outstanding levies, and any planned renovations or repairs to help you make an informed decision and avoid surprises.
Bodies corporate are legally required to draw up 10-year plans in which they estimate the total costs needed for the maintenance, repair and replacement of all major capital assets. The reserve fund forecast is used to implement this maintenance plan. The plan and forecast must be presented for approval at every annual general meeting. The maintenance plan should also be kept updated to reflect the most recent maintenance expenditure.
There is an annual statutory minimum contribution which owners must make to the reserve fund that is based on the ratio between the reserve fund balance and the administrative fund contributions.
- Rules of Conduct
Here are some examples of conduct rules. While not every complex will have identical rules, these generally appear:
- Alterations to units: Any modifications to units require permission from trustees, and changes affecting common property are forbidden.
- Pet ownership: Some schemes prohibit pets or have restrictions on certain types or numbers of pets.
- Vehicles and parking: Speed and unauthorized parking are contentious issues.
- Signs or notices: The display of signs on buildings is often forbidden without explicit trustee permission, including signs indicating that the property is for sale or rental.
- Laundry: Drying laundry in specific areas, such as balconies, is often prohibited.
- Refuse removal: Specific procedures exist for refuse disposal, including sorting and designated collection days.
- Security
In sectional title schemes, owners are accountable for securing the interior of their units up to the middle of the wall. The body corporate assumes responsibility for exterior areas beyond this point. This means that owners are responsible for installing burglar bars, security gates, and alarm systems if desired. Similarly, in estates, homeowners are responsible for securing their houses with necessary measures like security gates and alarms.
The role of the body corporate is to manage and maintain common property. In addition to physical barriers like fences, it should implement suitable security systems such as electric fences, CCTV, and access control gates.
- Is there potential for the sectional title scheme to expand?
You should ascertain whether the developer has registered a right to extend the scheme in the future, typically within a 10- or 20-year timeframe. This information should be disclosed in the Deed of Sale of the sectional title unit
The expansion of a scheme can significantly alter its appearance and value, and lead to additional maintenance and repair costs, also higher levies for existing owners.
- Alterations
Interior remodelling is permissible without body corporate approval, but alterations affecting the building's structural integrity are prohibited. Enclosing patios or verandas requires consent, which is usually dependent on whether the area is part of the owner's section or is common property. Approval is necessary for improvements or permanent structures in exclusive use areas. Trustees' permission is also needed for exterior changes such as door or window alterations. Any changes to common property, for example the installation of amenities like awnings or satellite dishes, require trustee consent.
The expansion of a unit's floor area through enclosure necessitates a special resolution from the body corporate and approval from all bondholders if the extension exceeds 10 percent. The submission of a sectional plan extension to the Office of the Surveyor-General for approval is mandatory.
- Compliance with the Ombud
All sectional title schemes must be registered with the Community Schemes Ombud Service (CSOS). Complex rules and regulations must be filed with the Ombud, and any disputes can be resolved through the Ombud.
- Electricity and Gas Certification
Valid Certificates of Compliance (CoCs) are required for electrical and gas installations for both the individual sections and for the common property. Unit owners are responsible for compliance within their own sections and the body corporate is responsible for any installations on the common property, such as outdoor lighting, gate motors, and CCTV systems.
Conclusion
The purchase of any property is a big step that has potential pitfalls. You need to understand these critical aspects of sectional title ownership, so that you can navigate the complexities effectively, protect your investment, and contribute to a harmonious communal environment. You should obtain sound legal advice from a reputable law firm before you commit to the purchase of a sectional title unit to ensure that you have peace of mind when you do decide to buy property in a scheme.
