Buying into sectional title just like buying into any business

SECTIONAL title ownership has shown major growth in recent years, not least because of the security it offers. It is best to try putting aside emotional aspects of the purchase, such as where the beds will go, how the lounge suite will fit in, or how convenient it will be to get to work. Instead, act like you're buying into a business, because in a way you are.

If there are 20 units you are effectively buying 1/20th of the complex and you will be liable for 1/20th (assuming the units are all the same size) of the running expenses. Expenses are paid with the income the body corporate derives from the monthly levies all owners have to pay. These include municipal fees for sewerage, water, electricity (not for inside the units), refuse bin hire if applicable, insurance, gardening, repairs and maintenance, administration, audit fee and so on. In blocks of flats there is also the expense of cleaning and if there is a lift there will be a lift maintenance contract. Some big buildings also have security staff and a caretaker.

Be aware of the monthly levy and expect it to go up annually.

On registration of your unit you will become a member of the body corporate, entitling you to a say in the running of the complex. By attending the annual general meeting you can volunteer to be nominated for trusteeship. As an owner you can also attend trustees' meetings; you may speak at these meetings but aren't allowed to vote.

The duties of trustees will be the subject of a future column but, briefly, trustees are responsible for the daily running of the complex, such as enforcing the rules.

If you're interested in buying into a particular complex, walk around it to assess if it needs major maintenance. Check paint work, plumbing and, if possible, the roof/s – you could be buying into a complex that may cost R70000 to R100000 (or more!) to renovate and you will have to pay your share of any special levy imposed to fix the problems. The less money the body corporate has accumulated the more a special levy will be.

It is possible to be in a complex a matter of days and be informed you have to pay a special levy within the next 30 days. Finding a few thousand rand after the expenses of moving and transfer costs can be stressful.

Ask the chairman if the complex has any problems and if the trustees expect any major maintenance soon. What will the likely costs per owner be? Some deeds of sale state if a special levy is imposed within three months of transfer the seller is liable. Have this inserted into yours: it could save you thousands.

Find out what the body corporate's conduct rules regarding pets are, as they could force you to get rid of yours. You have to apply to the trustees in writing for permission to keep an animal, reptile or bird.

 

Ask the sales agent to supply you with the following:

1. A copy of the body corporate's last annual audited financial statement. This will provide insight into their financial position, for instance the previous year's income and expenditure and the amount of accumulated funds, if any. Check that the outstanding levies situation is not out of control. Never buy into a complex that owes the municipality big money; you will become liable as one of the owners.

2. A copy of the levy schedule, and current annual anticipated income and expenditure statement (levy budget). This will detail the monthly expenses and list what all the owners' levies are and when the budget period ends. Check there is sufficient allocations for maintenance and for the reserve fund providing for long-term maintenance like painting every four to five years.

3. A copy of the sectional title plans so you can see what you are buying. The plans show the entire complex, exclusive use areas and common property areas.

4. A copy of the minutes of the last AGM and copies of the last few trustees' meetings. This will give insight into plans/problems discussed at these meetings.

5. A copy of the last municipal account. This will show if the body corporate is in arrears.

E-mail your sectional title questions to: Les@ReynardAgencies.com

Les Reynard has been managing sectional title complexes for nearly 30 years. He is a committee member of the Sectional Title Association of PE, and Reynard Agencies is a member of the National Association of Managing Agents.