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Expert Advice: A Guide to Sectional Title Schemes

Cleon Steyl, a Property Consultant at Terblanche Properties, recently spoke to us about body corporates, sectional title schemes and the rights and duties of owners of sectional title properties.

What is a Body Corporate?

"A body corporate is a collective term for all the owners in a sectional title complex," explains Cleon. 

“So for instance when a developer of a scheme transfers the first unit to another owner, they will constitute the Body Corporate,” he adds. 

Cleon notes that there are three different types of body corporates in South Africa, namely the Board of Directors in Shareblock Schemes, the Board of Directors in Home Owner’s Associations (HOA’s) and a Body Corporate in Sectional Title Schemes.

For this article, we will be focussing on a body corporate and sectional title and, therefore, it is important that we understand what is meant with "a stand" and "a unit."

The difference between a unit and a stand

According to Cleon, a unit in a Sectional Titles Scheme is the section (this is your apartment/flat from the median line of the walls/floor/ceiling inward) plus your share in the common property.  The plot of land ("stand") on which the building(s) are built on is owned in common shares by the owners of the sections.  

With Home Owner's Associations (HOA's), you own the plot of land your house is built on; while there are common areas such as the roads, recreational areas and so forth.
Duties of the Owner

Being an owner of a sectional title unit imposes certain duties according to the relevant sections of Sectional Title legislation. Cleon states that such duties include: 

- permitting all authorised person(s) into his section for repairs/maintenance or inspection;
- carrying out work ordered by a public or local authority ( such as a municipality) and is responsible for charges in   respect of his unit; 
- keeping his section in a good state of repair (including the exclusive use areas); 
- using and enjoying the common property in such a manner as not to cause a nuisance to other owners; 
- paying the levy; 
- not using his section so as to cause nuisance to other owners.  

It is also important to note that in terms of Sectional Title legislation, the body corporate must insure the buildings, boundary walls and common property.  It further stipulates against what risk the scheme must be insured. 
The following are just some of the risks against which a scheme must be insured: 

- fire,  
- lightning, 
- explosion, 
- riot, 
- civil commotion,  
- earthquake, 
- housebreaking; 
- and bursting or overflowing of water tanks and/or pipes.  

The personal contents inside each unit must however still be insured by the occupant.  So to clarify, the body corporate is obligated by law to insure the structure and common property; while each individual occupant is responsible for insuring his/her possessions.

Financial Health of Sectional Titles

The financial well-being of a sectional title scheme is important and as an owner you have right to see the financials of the scheme. Cleon says that you can ask your managing agent to send you a copy of the latest statement of funds in the scheme's (investment) account.  

He says that if your scheme has extremely low levies and regularly needs to raise a special levy to cover costs of maintenance it is a clear indication that they are not saving enough. Alternatively, if your levy is reasonable, yet the trustees/managing agent is continually spending money on projects or large ticket items such as lawnmowers or bigger gate motors - you could also run the risk of not saving enough. 

In terms of spending money on maintenance, owners can take certain steps to ensure that building maintenance is done properly. He says that a good starting point would be to become a trustee. This way you could ensure that the service providers used are professional and have a good reputation. 

This is where the managing agent can give owners/trustees guidance since they work with plenty of service providers and will gladly tell you who to use.  “If possible, get the service providers to guarantee their work,” he adds.

Maintenance

It is beneficial to know the difference between maintenance and routine maintenance. Cleon states that routine maintenance is maintenance done to the common property to minimise capital expense. 

For example, routine spraying of the paved areas with herbicide will prevent plants from growing through the cobblestones/cracks - which in turn will prevent the body corporate from having to repave.  

It can also be the sanding off and oiling of outside wooden doors/gates every 2 years or so.  This could also be a maintenance contract with a qualified person who will come and inspect and repair the electric fence every couple of months.

Neighbour and tenant issues

Probably one of the biggest issues in a sectional title scheme are related to issues between inconsiderate residents. Cleon notes that the first step you should take when dealing with issues such as parking problems or a noisy neighbour, for example, is to do the neighbourly thing - talk to them and ask them to stop what they are doing.  

“It is always better to not strain neighbour relations too much.  You can ask a trustee/chairman to follow up on your initial chat. However, should your friendly chat not work, you can ask the trustees to give them a written warning to stop their specific conduct, along with the specific rule preventing/regulating that behaviour,” he says.

Adding that this will normally be done via the managing agent and may even include a warning or a penalty should there be a recurring incident.  

In the case of a noisy neighbour, the same procedure can be followed and when the neighbour is a tenant, the rental agent can also be contacted and made aware of the offending conduct. This ensures that the landlord is aware of the problem and warning letter can also be sent to both parties (ie landlord and tenant)

The benefit of having a managing agent

By now you might be wondering what the benefits are of having a managing agent, Cleon explains that for many people their home will be the single most expensive possession they own and, therefore, it is of the utmost importance that the asset be taken care of in such a way to add value.  

“In communal living this type of care can only be given by someone with the right knowledge, and for the most part people buying into a sectional title scheme might not have the sufficient knowledge of property, not to mention sectional titles and financial administration to manage their asset correctly. Therefore, having a professional managing agent with the property qualifications will take this headache off your hands and will ensure that your asset is taken care of correctly to grow in value.”

If you do have a managing agent but you aren’t happy with the service they are providing, you should be aware of certain steps you can take. 

Firstly, notice can be given to the managing agent, either through a trustee meeting resolution or by way of an ordinary resolution at a general meeting of owners.  It must be borne in mind that the managing agent is appointed for a term of 12 months.  Therefore, should notice be given, it will run until the end of the term; at which point the new managing agent will take over.  

However, if the managing agent failed to do its duties; or is in breach of contract; or has done something which in terms of the common law would cancel the master/servant relationship - no notice is necessary and the contract can be terminated summarily.  If the trustees cancel the contract due to such a breach, the managing agent has no further claim against the body corporate. However, if an owner or mortgagee asks for the contract to be cancelled due to such a breach, the body corporate/mortgagee must furnish the trustee with security in the event the managing agent institutes a claim for compensation.  Furthermore, to cancel a contract this way, it must be included in the management agreement.

Consider these final thoughts

Cleon says that if you are considering buying into a sectional title scheme that you should obtain the latest copy of the rules as well as the latest financial statements regarding the complex. Adding that it is also beneficial to obtain the minutes of the last Annual General Meeting (AGM) and/or the most recent trustee meeting minutes.  “This is to ensure that you can see whether the scheme is in good financial standing; and whether any major maintenance work is being planned where there might be a special levy payable,” he says.

He concludes by saying that when you are viewing the unit that you are potentially buying, that you should also have a look at the condition of the complex as a whole. Look at the condition of the pavement, the condition of the paint, does the gate work and so forth. If any of those are lacking then there might be a problem with routine maintenance, which usually indicates a deeper problem.


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