select
|

When purchasing a sectional title unit, make sure the levies are set at the correct level

In some sectional title schemes, trustees might think keeping the levies as low as possible would be beneficial to the owners, but this is sometimes incorrect. Levies might be so low that the residents have to be called on repeatedly to pay special levies or much-needed maintenance might be neglected, says Mandi Hanekom, operations manager for sectional title finance company Propell.
 
Prospective buyers should, when viewing sectional title properties, assess the levy structure in relation to the amenities provided – and then consider what these amenities might cost them each month if they owned a freestanding home. If, for example, there is a swimming pool and clubhouse with a community garden and entertainment area, or excellent security, this will add to the monthly levy payments each month, but these amenities also contribute to the owner’s enjoyment of living in that scheme. Prospective buyers should also take into account other expenses, such as the running costs of electric fencing and the salary costs of security guards or gardeners.
 
If the trustees manage the scheme well, the scheme will have sufficient cash flow to meet its month to month running expenses and will have planned for the coming five to ten years’ maintenance on the building. In addition, the scheme will have enough cash in its reserve fund for major repairs (which is a legal requirement now).
 
If the owners’ levy payments are set too low, this could lead to the trustees running the scheme in a “survival” mode where just the necessary bills are paid each month and repairs or maintenance (such as painting or waterproofing, for example) are not attended to. This then starts a downward spiral with more funds needed for repairs and maintenance as the building’s condition deteriorates. This could, in turn, lead to a drop in value for sections and decreased popularity of the scheme.
 
This is particularly important in older schemes where more maintenance will probably be necessary and where high budget items such as roof or lift replacements might become necessary.
 
Potential buyers should check the financial statements, budget and trustee resolutions of the scheme they are interested in carefully, as these will show what amounts have been budgeted for, whether the scheme has savings put away, or not, and what the monthly levy obligation of owners are.
 
Hanekom’s advice is: “It’s best to check first so that there isn’t time wasted on a scheme that may only look good on the surface.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Jan 2018
      Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK