SECTIONAL TITLE OWNERSHIP SIMPLIFIED
Category Property Ownership
Sectional title describes separate ownership of units within a complex. When you buy into a sectional title complex, you purchase a section or sections plus an undivided share of the common property, known as a unit.
The Benefits
Affordability. Generally, a sectional title unit is more affordable to buy than a freehold property and the monthly expenses like rates and taxes, maintenance, insurance, etc are far less than for a freehold property.
Security: Entrances to complexes mostly have controlled access and strict security measures are in place. A communal environment is probably more secure than living in a freestanding home.
Fixed monthly costs: Owners of sectional title units pay a monthly levy that stays the same for at least one year at a time which makes it easy to adhere to a monthly budget.
Communal living: People seem to be more neighbourly, have better interaction, and form close-knit communities in sectional title schemes.
Disadvantages of sectional title ownership
Management Rules: One doesn't have the power to change the rules and one must comply with the conduct rules as laid out by the Body Corporate.
Less freedom: Owners that want to renovate their units, need to get approval from the Body Corporate before they can commence with any construction.
Liable for the debt of the Body Corporate: You will be liable for the debt of the Body Corporate. As such, it is important to deduce if the scheme is being well managed and that the financial statements of the Body Corporate are all in order before purchasing a unit.
Elements of Sectional Title
- Owners' sections are the sections within a scheme that are individually owned and are registered in the name of the owner. These areas are the space between the walls, ceiling, and floor, which could include a garden, storeroom, or garage. It is important to check the extent of your section/s on the sectional plans filed in the Deeds Office.
- A unit is comprised of a section in a scheme, together with an undivided share of the common property in the scheme.
- Exclusive use areas are portions of the common property in respect of which an owner will pay a levy for the exclusive right of use of the said eg. parking bays, gardens, storerooms, and balconies. There are two types of exclusive use rights - those shown on the sectional plan (ceded on transfer) and those recorded in the scheme's rules (allocated).
- Common property is the remainder of all of the land that comprises the scheme (including exclusive use areas) and is owned by all of the owners in the scheme in undivided shares based on the owner's participation quota and is for the use and benefit of all members of a scheme eg. the pool, driveway, etc.
Exploring some terminology
Body Corporate
All the owners of units within a particular complex form the Body Corporate and are collectively responsible for managing the scheme and taking care of its maintenance and finances.
Once you purchase a property in a sectional title scheme, you will automatically become a member of the Body Corporate and be bound by the Rules of the Body Corporate, regardless of whether you agreed to them or not. It is therefore imperative to scrutinize the Rules before making an offer on a unit.
Trustees of a scheme
Trustees are elected by the owners/members of the body corporate to administer the day-to-day management of the scheme.
Managing Agent
The trustees could be mandated by the members of the scheme to appoint a Managing Agent to assist the trustees in carrying out their duties which include collecting monthly levies, paying the scheme's insurance premiums and other expenses, arranging meetings, ensuring compliance with the Sectional Titles Act, and ensuring that the owners and tenants comply with the Body Corporate Rules.
A Management Agent must have a valid Fidelity Fund Certificate issued by the PPRA and preferably be a member of NAMA (National Association of Managing Agents) as these organisations have ethical codes to which members are obliged to adhere.
The Annual General Meeting (AGM)
An annual general meeting must be held once a year within four months of the scheme's financial year-end. It is a compulsory meeting for all owners in the scheme and to be legally constituted, a specific number of members in the body corporate need to be present to establish a quorum.
Funds applicable to a scheme for which an owner is liable
When you buy a Sectional Title Unit you become a member of a Body Corporate and you are legally obligated to pay contributions to the Body Corporate, which are called levies.
The administration fund covers the day-to-day running costs of a scheme, whereas the reserve fund is used to cover the cost of future maintenance and capital expenditure of the scheme.
Special Levies
Special levies are amounts levied to provide for unbudgeted expenses that are not included in the normal levy.
Community Schemes Ombud Service
Its functions include the vetting of conduct and management rules, resolving community scheme disputes, and educating members about any form of community schemes.
Any individual who has a material interest in the finances of the Body Corporate and is dissatisfied with the amount budgeted by members for the administrative or reserve fund may approach the Community Schemes Ombud Service (the "CSOS") for an order declaring the amount unreasonable and adjusting the amount accordingly.
It provides a cost-effective dispute resolution mechanism for disputes that might arise in any type of Community Scheme and does not involve expensive legal costs. The decision of the Ombudsman will carry the same weight as a court order.
Author: Adrie Barnard
