-Sectional Title…

Sectional Title – what is it and what are the advantages and disadvantages?

Sectional title living has grown in popularity over the last decade for reasons which include heightened security and a more communal way of living. Sectional titles tend to be more affordable which makes it easier for young people to own their own property. However, buying into a sectional scheme has its advantages and disadvantages.

Sectional title developments are governed by a Body Corporate, which is the collective name given to all the owners of units within any particular complex. The Body Corporate is responsible for managing the scheme and taking care of its finances. A managing agent is often appointed to take care of the duties of a Body Corporate, which includes collecting monthly levies, paying the scheme’s insurance premiums, arranging meetings, ensuring compliance with the Sectional Titles Act, maintenance, and ensuring that the owners and tenants comply with the Body Corporate rules.”

What is a sectional title?

The concept ‘sectional title’ describes the separate ownership of units or sections within a complex or development. When you buy into a sectional title complex, you purchase a section or sections together with an undivided share of the common property, which are know as units.

Advantages:

An owner of a unit in a sectional title scheme automatically becomes a member of the scheme’s body corporate. The body corporate is the legal entity that owns and controls the common property in the sectional title scheme. The body corporate is responsible for laying down the rules that have to be adhered to by all the owners.
The body corporate receives funds from all the owners by means of levies, which are used to pay for the expenses of the sectional title scheme.
Unlike freehold properties, where the owners have to pay for their own home insurance and for the upkeep of the pavement, garden and exterior of their homes, owners of sectional title units pay a monthly levy instead. The levy usually includes the insurance premiums, maintenance of the common property, wages and salaries of cleaners, security and other staff involved in maintaining the common property.
Owners of sectional schemes usually only need to pay for their rates and taxes, insurance for the contents of their home, their own private gardens and for their monthly electricity and water consumption (although water is often includede in the levy).

Disadvantages

Unlike full-title ownership, where the owner is in complete control and is financially responsible for the property, a person who invests in a sectional title scheme will own part of the scheme, meaning that the owner has invested in and is part of a small community.
As a result they will have to comply with the management rules and conduct rules as determined by the body corporate. The body corporate may adopt rules relating to the keeping of pets, play areas and access to communal areas.
The rules and regulations of any particular complex may change, and even though all sectional title investors or owners may not necessarily agree with the changes, they would not have the power to change them individually.
Owners of sectional title units also do not have the freedom to alter, renovate or expand their sections without the approval of the body corporate.
In addition, all owners are jointly and separately liable for the debt of the body corporate, which means that if an owner does not pay his/her share, it may become the other owners’ problem as well.

Sectional Title – Common Terms Explained:

Annual General Meeting:
Every Body Corporate has to hold an AGM not later than 15 months after the previous one. Trustee appointments and other major matters are dealt with at these meetings.

Body Corporate:
This is the association of all the owners of units in each scheme. Every owner has a vote at each meeting and if he owns more than one unit, he has a corresponding number of votes. The Body Corporate appoints the complex’s trustees.

Common Property:
Driveways, lawns, swimming pools and other facilities on any complex form part of the common property. Each owner of a unit has an undivided share in the common property.

Conduct Rules:
These rules are the equivalent to a code of conduct controlling the behaviour and activities of all owners, tenants and visitors. Each scheme can draw up its own rules and amend them from time to time as the Body Corporate chooses.

Developer:
The owner of the whole property who converted it initially into a Sectional Title scheme is legally known as the developer. He remains a member of the Body Corporate once it is formed while any of its units still belong to him.

Exclusive Use Area:
Any garden, garage or yard may be awarded to any owner of a unit as an exclusive use area. He may usually sell it independently of his unit to any owner of another unit in the complex. Exclusive use areas can be separately registered.

Management Rules:
These are prescribed by the Sectional Titles Act and govern the administration of each scheme. They may be amended but any changes may not be contrary to the general provisions of the standard rules set out in the Act.

Managing Agent:
Each Body Corporate is entitled to appoint an estate agency, accounting firm or a company predominantly focusing on Sectional Title management as its managing agent. It collects the levies and attends to the scheme’s general administration.

Ordinary Levy:
Every owner has to contribute to the rates and taxes imposed on the scheme as well as its general expenses. The Body Corporate can decide whether to levy the same contributions on each owner or apportion them according to the participation quota.

Ordinary Resolution:
This is a decision of a general nature taken at a Body Corporate meeting. Only a simple majority, which is 51% of votes, has to be acquired for the resolution to be effective. These resolutions cover the day-to-day running of the complex.

Participation Quota:
According to the square-metre space of each unit, which may vary, each owner has a percentage quota in the overall extent of the scheme. This usually determines his share of the monthly levies and other contributions.

Right Of Extension:
Every developer has the right, when first registering the Sectional Title scheme, to reserve the right to extend it by adding further buildings and units.

Section:
This is the legal definition of any unit, apartment or townhouse in a complex. Gardens and parking areas, which would normally be exclusive use areas, may be registered as separate sections in any Sectional Title scheme.

Sectional Plan:
This is the layout of the whole scheme, which a land surveyor draws and which, after approval by the Surveyor-General, will be registered at the local deeds office. Only after registration can a unit be transferred to a buyer.

Special General Meeting:
At any suitable time the trustees or a member may call a special meeting to deal with any issue that cannot wait until the next AGM. These meetings are conducted in the same way and the Body Corporate has to notify each owner of them.

Special Levy:
The trustees of each scheme have wide powers to manage the complex and take decisions on behalf of the Body Corporate. This includes the right to impose special levies over and above the normal levies for any specific purpose.

Special Resolution:
In some cases, such as awarding the right to any owner to extend his section, a special resolution is required. Seventy-five percent of the members of the Body Corporate must be present at a meeting and a 75% vote at the meeting is required to pass the resolution.

Trustees:
Each Body Corporate appoints its own trustees to look after the complex and act as its administrators. Though they have considerable powers to make decisions, they have to act within the scheme’s rules and may make management decisions only.

Unanimous Resolution:
In very special cases, such as a decision to sell off part of the common property, a unanimous resolution must be passed. Eighty percent of the unit owners must be present at a meeting and a 100% vote in favour must be taken.

Unit:
This is basically the actual building or apartment you occupy. It does not include parking areas, gardens or parts of the common property. You obtain complete ownership of your unit but are still bound to certain rules if you want to alter it in any way.