select
|

Financial planning in Sectional Titles

This essential management task, if not handled correctly, can have far reaching effects, not only on the way a Sectional Title scheme functions but also ultimately on the saleability and value of the property.

According to Martin Bester, the Managing Director of Intersect Sectional Title Services, who sits on the board of the Residential and Sectional Title Committee of SAPOA and is a committee member of NAMA and the Sectional Title Regulations Board, ensuring that such a fund is established and, very importantly, maintained, is the responsibility of the trustees, who do so with the assistance of the managing agent, if appointed.

“One goes about ensuring that an adequate fund is maintained by preparing realistic budgets every year for approval by the members at an AGM.  Reference to the actual costs from the prior year is a good starting point and trustees need to be cognisant of actual costs of running the scheme and should further provide for reasonable contingencies.  (Note that the City of Cape Town’s increases are implemented annually in July and this needs to be considered when budgeting as municipal costs often constitute a large percentage of the scheme’s running costs).”

“Repairs and maintenance costs are difficult to foresee, however if the Trustees are aware of upcoming projects, quotes can be obtained, and escalated if necessary, to assist with the budgeting process,” advises Bester.

“Members also need to be realistic when approving a budget at the AGM as any amendments made, specifically where proposed levies are reduced, could have long terms effects on the overall financial position of the scheme.”

According to Bester, the ramifications of not adequately establishing and maintaining such a fund could result in the scheme not being able to meet its expenses and may result in special levies having to be raised to cover same.

“Whilst special levies, specifically for major projects such as painting, waterproofing, roofing and improvements, are common place in sectional title, these should be raised for specific purposes only and not to compensate for a lack of funds.”

“One must also bear in mind that potential purchasers and bond holders view the financial statements of a sectional title scheme prior to purchase or granting a bond and that a poor set of financial statements are negatively viewed by both parties.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Feb 2018
      Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
    • 21 Feb 2018
      The real estate mantra, ‘location, location, location’ remains a strong market influence regardless of the prevailing economy, with suburbs like Rondebosch enjoying the buffering benefit of being ideally situated.
    • 21 Feb 2018
      These days most buyers are using online property portals like Private Property when house hunting due to the convenience, up to date information and variety on offer. “The property portals have revolutionised the way buyers shop, but they do need to be cautious – viewing photos online is no replacement for viewing the property in person,” says Bruce Swain, CEO of Leapfrog Property Group.
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
        
    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