In the fifth part of our series on buying property, Charlene Clayton has some advice for anyone thinking of buying sectional title.
Some of the major advantages of choosing a sectional title property such as a townhouse or flat are often the security aspect and the fact that maintenance is a shared responsibility.
The only real difference in costs between an individual title house and a sectional title unit is the fee of the managing agent attending to the administrative tasks of the complex.
The idea of levies often frightens off people from sectional title schemes, but levies are no more than the monthly costs associated with owning an individual title property. If you own a house, you have to pay rates and taxes, insurance, maintenance, and lights and water.
This also applies to a sectional title scheme, except that these costs are budgeted for and divided out as levies, says Cape Town attorney, Stephen Harding.
To establish a sectional title scheme for either a new or existing building, a developer has to apply to the local authority for approval for a draft sectional plan, says Harding.
This plan, prepared by a land surveyor or architect, defines the individual sections or physical flats, the common property, and the exclusive use areas.
The common property is everything outside the flats. Exclusive use areas are the common property allocated to a unit owner for his or her exclusive use, for example, gardens, balconies and sometimes carports and parking bays.
The plan should also show the participation quotas of each section. This is a formula which defines the interest each individual owner has in the common property. The participation quota is based on the proportion of your flat to all the other flats.
Your levy is worked out according to the participation quota of your unit.
The levy you will pay is calculated by taking the annual budget, divided by 12 to get a monthly figure and multiplied by your participation quota.
This plan is then submitted to the local authority for approval. The local authority may impose certain conditions, such as garages may not be sold separately from the flats.
Once approved by the municipality, it goes to the surveyor-general for his go-ahead. Thereafter, a conveyancer will submit the plan, together with other documents, to the deeds registry in order to open a sectional title register.
The land on which the property is situated is then removed from the land register to a separate register created for the scheme and its underlying piece of land, says Harding.
Thereafter the developer will start transferring the units and exclusive use areas to the purchasers.
When you buy a sectional title unit, you get title to the area bounded by the middle of the outside walls, the floor and the ceiling of your unit as well as a share in the common property apportioned according to the participation quota for that section.
At the moment, when the sections are transferred from the developer to the purchasers, a new "legal person" comes into being - the body corporate.
From this point on, the land and other common property is owned by all the owners according to the participation quotas.
Within 60 days of the first transfer, the developer must convene a meeting of the members of the body corporate.
At this meeting, trustees are elected to represent the owners.
People eligible to serve as trustees include yourself as the unit owner, your spouse, or in the case where a unit is owned by a company, a representative from that company.
Outsiders may also serve as trustees as long as the majority of trustees are owners or their spouses.
At the first meeting, the obligation for the insurance covering the building passes from the developer to the trustees.
One of the items to be covered at this meeting is the appointment of a managing agent, who takes care of the administrative functions of the body corporate. The agent will, for example, pay the joint rates and taxes and joint water and lights account of the body corporate.
Other responsibilities include the issuing of accounts to the owners for their monthly levies and electricity and water accounts, as well as dealing with the maintenance of the property on instruction from the body corporate.
"The agent will generally relieve the trustees of the administration burden," says Harding.
The services of an agent cost a little extra and are shared out in the levies.
Other items handled at the first meeting include financial matters; the appointment of an auditor; and any special body corporate needs.
The trustees have various powers relating mainly to the daily running of the scheme, but these do not extend to making radical changes, says Harding.
"The Sectional Titles Act itself provides fairly substantial protection for the individual owner."
The Act stipulates "levels" of consent required for various actions that the body corporate wishes to take.
The least important level of consent are matters which require only the trustees' decision.
Next are matters which require an ordinary resolution of a general meeting of owners, followed by matters which require a special resolution of a general meeting. (defined as consent of 75 percent of those present or their representatives).
In addition the participation quotas of those attending must be 75 percent, in other words, it's not sufficient that 75 percent of the owners of only the small flats are in favour of the project.
Then there are matters which require a unanimous resolution. Everyone present at the meeting must be in favour of the resolution and there must be an 80 percent quorum.
And finally the most onerous of them all, the written consent of every owner in the scheme.
"So there is a well thought out legislative framework stating what can be done and what consent is required," says Harding.
If, for example, the body corporate wants to install a security system, it would be defined under the legislation as a "non luxurious improvement".
It obliges the trustees to give notice of the intention, they have to indicate the costs, the manner of financing, the effect on levies and the need for the security system.
If any owner disagrees with what the trustees are proposing, they have to have a special general meeting. Decisions regarding the maintenance of the property are trustees' decisions.
A prudent body corporate, if it decides that it is going to repaint every five years, should budget and collect sufficient funds in that period to enable it to do so.
It must also make reasonable estimates of what other kinds of maintenance might be required and build up a reserve to cover it.
If there is insufficient money in reserve to pay for maintenance or improvements, these are funded by a special levy.
Very often the trustees will allow unit owners to pay the special levy over a couple of months.
Harding says a sensible buyer, who buys into an existing sectional title scheme, should ask for the financial statements of the body corporate.
The most important feature to look for, is to check that the reserves are adequate and the financial position of the body corporate is sound.
As a sectional title owner you are also bound by the rules of the scheme. These are divided into management rules and conduct rules.
Management rules deal with matters such as the trustees, the disqualification of trustees, their powers and duties, and the meeting procedures.
Conduct rules cover the things you can and cannot do, and will say whether pets are allowed and where you may hang your laundry.
The law prescribes an initial set of rules, which can be amended by either the developer or body corporate.
* Allow the body corporate reasonable access to your unit;
* Carry out any work on your flat required by the local authority;
* Keep your section and exclusive use area neat and tidy;
* Use of the common property as well as your areas must not interfere with the use or enjoyment by other owners;
* Inform the body corporate of a change in ownership; and
* Use your unit only for the purpose intended by the sectional plan.