select
|

Time for share block has gone

There is really no good reason now for any block of flats or group housing scheme to be run as a share block company, and those that are should be converted to sectional title without delay.
 
That’s the word from Andrew Schaefer, MD of leading national property management company Trafalgar, who adds that the tax advantage of purchasing in a share block instead of a sectional title scheme was eliminated by SARS way back in 2002, and that share block companies are tricky to run in terms of the requirements of the new Companies and Intellectual Property Commission (CIPC).
 
“By contrast, conversion is a relatively simple process, especially if the share block company has an experienced managing agent and an attorney on hand to assist with the legalities of drawing up sectional plans, opening the sectional title register, transferring the new sectional title units to their owners and then removing those owners as shareholders of the share block company.”
 
Some shareholders, he says, may be reluctant to embark on this course because there are certain legal fees and costs involved. “However, many laws and regulations have changed since share block was introduced to SA, and these shareholders should be aware that they could shortly come up against some very real - and possibly very expensive - problems if they stay as they are.”
 
These problems could include:
*No separate accounts from the local authority for rates or refuse removal. The share block company gets one municipal account to pay and must then recoup its expenses via the levies on shareholders, and if it fails to pay the council, then all the shareholders are in trouble.
 
*No home loans for potential buyers. At the moment only two banks will grant loans for the purchase of share block units, and they charge higher interest rates than on normal home loans. They also require these loans to be paid back in shorter periods that the usual 20 years. This can make it very difficult to sell share block units as most potential purchasers would need a home loan.
 
*No actual ownership of your unit. Share block ownership is not actually property ownership. When you buy a share block unit, you are really only buying the right to use it, which is linked to your purchase of shares in the company that owns and runs the building. Your “proof” of ownership is a share certificate issued in your name. When you buy a sectional title unit, on the other hand, you get a title deed that is registered at the Deeds Office.
 
“And in Durban,” Schaefer says, “there are even more serious problems looming for owners in some of the share block buildings that were built on land leased from the city council, because those leases are running out. They really do need to convert their ownership to sectional title as soon as possible.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    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