Sectional Title Explained

Buying a home in South Africa can take on a few different forms, the two the main types being a freehold or full title and sectional title properties.  Often these concepts can get confusing but once you understanding the difference you will be better equipped when choosing the best type of property for your specific needs.

Full title properties are properties that described the transfer of full ownership rights when you own a property, which includes the building and the land it is built on, these include free-standing houses, cluster houses and houses used for businesses as well as smallholdings.

Sectional title properties are properties with separate ownership of units or sections within a complex or development. So when you purchase a townhouse in a complex for example, you are purchases a section or sections and an undivided share of the common property, collectively referred to as units. Sectional title properties include mini subtype houses, semi-detached houses, townhouses, flats or apartments and duet houses.

In a sectional title scheme or complex as it is also commonly referred to, owners are obligated to pay levies, usually according to the size of their units.  The levies are calculated in accordance with a budget, which is prepared annually by the trustees or managing agent.

Sectional Titles can be seen as an affordable investment that will yield a great future return on investment.

Advantages of sectional title scheme ownership include:

• 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.
• 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.
• Sectional title developments generally have good perimeter and entrance security, which is usually included in the monthly levies and allows for a greater sense of security.

Disadvantages of sectional title scheme ownership include:

• People 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 need to comply with the management rules and conduct rules as determined by the body corporate.
• 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.

For more information and or an obligation free quote visit www.fitzanne.co.za

Roles and duties of Trustees

Sectional Title Schemes or complex, as it’s more commonly known as is controlled and managed by a Body Corporate. Trustees are then persons elected by the members (residents or non-residents of the scheme) who are then mandated to manage the funds and affirm rules and policies within the sectional title scheme. New members are elected at every Annual General Meeting.

The trustees carry a huge weight on their shoulders and are often blamed for any or all financial difficulties the scheme may endure. Often the problem with the trustees lies in the fact they the trustees, who are volunteers and not remunerated for the work they do, are not always trained to do the work at hand.

It’s vital that the trustees should have copies and be well-versed with the Registered Management Rules, the conduct or house rules, a copy of the Sectional Title Act and the Amendments Act, the sectional plan of the scheme.

The powers of the trustees are embedded in the Sectional Title Act and the rules of the scheme. It’s the responsibility of the trustees to contract reputable service providers, garden services, painters, electricians and plumbers for example. The trustees are also to maintain and let the common property areas, like allocating parking bays as well as gain access to sections and exclusive use areas for maintenance purposes.

It is also vital that the trustees keep accurate and up-to-date financial records for the scheme. Money received and spent by the trustees must be carefully recorded and financial statements must be kept and audited by professional auditing firms.

In the event that a member of the trustees has not paid his/her levies for more than 60 days, or if he tenders a resignation  or if legally declared to be of an unsound mind, or if they have been convicted if an offence, they will be removed from office automatically.

It’s vital that trustees meet regularly to discuss duties and decide who will carry out these duties. All meetings must be conducted in a professional manner and as such there should always be a quorum and strict minutes must be kept at all times.

Trustees’ responsibilities include but are not limited to:

• Conducting regular meetings
• Overseeing of all levy collections
• Active enforcement of rules
• Managing of common property of the scheme

What does a managing agent do?

Many South African’s enjoy the many benefits of complex living but one thing they seem not to enjoy is the head-ache of feeling as though their complex isn’t managed properly.

It’s very unfortunate that managing agents are viewed in a very negative light by home owners, some of the home owners’ concerns may be justified but it’s certainly unfair to expect things from managing agents it’s not their responsibility in the first place. As such it’s important to establish the roles and duties of the managing agent.

The short answer is that managing agents are to managing the complex on behalf of the trustees. The long answer involves a more complex explanation embedded in the prescribed management rules (PMRs), which are annexures to the regulations under the Sectional Title Act, 95 of 1986. The Act only makes provision for how the scheme interacts with the managing agent if one is appointed, and does not elaborate on what they should or shouldn’t do.  For this reason the duties of the managing agent, lies in how details the contractual agreement between the scheme and the managing agent is. The duties of the managing agents are based on contracts in place and not legislation.

Having good managing agents for your complex (scheme) is seen as best practice because it allows the managing agent to act as a ‘middle-man’ guiding both the home owners and the trustees toward the Act, ensuring also that financial, administrative and secretarial issues of the scheme managed effectively. However these are all outlined in the contract, which is why it’s so important for the contract to be clear and very specific.

Reputable managing agents should be registered with the Estate Agents Affairs Board (EAAB), this in itself will benefit the scheme immensely. Also when choosing a managing agent it’s imperative to the well-being of the scheme that contactable references is kept on record.

Although the trustees may appoint excellent managing agents to perform some or all their legislated tasks, they cannot delegate their responsibility and fiduciary duty in respect of those tasks.

For an obligation free quote visit us at www.fitzanne.co.za

Helpful tips on choosing a great managing agent.

At the very core of it, sectional title schemes are best described as separate ownership of a unit which is situated in a group-owned complex or development.  Breaking it down further, this means that every sectional title scheme comprises of three elements, first the owners’ sections, the exclusive use areas and common areas.

For most of us, when applying for a bond based on a sectional property, the bank will not only consider your personal financial health, but also that of the sectional title scheme’s body corporate.  For this reason it’s imperative that the managing agents chosen by the scheme, have a sound track record, where their integrity, loyalty and dedication have been proven.

Managing agents represent the interest of sectional title schemes; the trustees and the owners, so the right candidates are imperative, as the smooth functioning of admin, finance and property management falls on them.

Choosing and trusting the correct managing agent is vital to the ‘well-being’ of the sectional title scheme and should not be done haphazardly. Often trustees base their decision of choosing a managing agent on price alone, but considering the financial implications in the long-run, should anything go wrong, this is an ill-advised method of going about selecting a managing agent.  The ‘word of mouth’ method is good to consider but always remember to do your research well.

We suggest the following key factors for consideration:

• Ensure that your managing agents is a registered agent, with proof available. The managing agent should be in possession of a valid and current, Estate Agency Affairs Board Fidelity Fund Certificate.
• Research the managing agent’s work, with solid track records, backed by testimonials from other trustees from other sectional title schemes.
• The managing agent should have professional indemnity and fidelity insurance.
• Choose managing agents that can prove that they are able to multitask well and make your sectional title scheme a priority within reasonable time.
• Choose managing agents that show passion toward sectional title schemes and a clear love for the industry. Visit their existing sties and see how they interact with their staff.
• Be very clear about what you want the managing agent to do in your contract, the contract must state how often you will meet and the costs involved.

It can be said that the managing agency industry has become quite competitive with the passing of time. It is a competitive industry but the best managing agents will always try to provide you with the required information and will be able to communicate their limitations as well. There is certainly a good managing agent out there for you.

What are the steps to follow when appointed as Managing Agent for a new Scheme?

 

1. Doing the happy dance!
2. Letter of appointment to mandate new Managing Agent to liaise with current Managing Agent regarding all matters of take over.
3. First info required:

• • Members address list and contact detail.
  • Current schedule of levies and other charges.
  • Closing balances on all accounts.

4. Sending of welcoming letter to all members informing appointment of new Managing Agent and detail as to where and how levies and relevant charges should be paid.
5. On receipt of all other financial records and correspondence, to check:

• • If minute book is up to date with all minutes, including the most recent Annual General Meeting.
  • Financial records including all invoices for current period and at least 6 (six) years’ records prior to take over.
  • Informing all contractors and service providers on change of address.
  • To make sure correct balances of current account and reserve accounts are transferred.
  • Re-instate debit orders (insurance premium inter alia).
  • Check last payment to Community Schemes Ombud Service (CSOS).
  • Determine which members have been handed over for collection of arrears and/or those in the process of being transferred / informing attorneys of appointment.
  • Check on outstanding insurance claims.
  • Follow up on arrear creditors and the reason why.
  • Contracts of employment / check on deductions such as loans, rental agreements, policies, court orders and/or funeral benefits.
  • Current guarantees on completed maintenance projects.
  • Contracts of appointed service providers.
  • Opening of new current and investment accounts as per instruction from the Scheme Executives (Trustees / Directors).
  • Financial year-end, latest Audited Financial Report.

6. Involve Scheme Executives, if necessary, to assist in obtaining missing documentation.
7. Signing of new Management Agreement.
8. Informing Scheme Executives on progress.
9. Deliver service to such an extent that Scheme Executives will never doubt their decision to change Managing Agents!

 

How to Choose a Good Managing Agent? – Helpful Tips

At the very core of it, sectional title schemes are best described as separate ownership of a unit which is situated in a group-owned complex or development.  Breaking it down further, this means that every sectional title scheme comprises of three elements, first the owners’ sections, the exclusive use areas and common areas.

For most of us, when applying for a bond based on a sectional property, the bank will not only consider your personal financial health, but also that of the sectional title scheme’s body corporate.  For this reason it’s imperative that the managing agents chosen by the scheme, have a sound track record, where their integrity, loyalty and dedication have been proven.

Managing agents represent the interest of sectional title schemes; the trustees and the owners, so the right candidates are imperative, as the smooth functioning of admin, finance and property management falls on them.

Choosing and trusting the correct managing agent is vital to the ‘well-being’ of the sectional title scheme and should not be done haphazardly. Often trustees base their decision of choosing a managing agent on price alone, but considering the financial implications in the long-run, should anything go wrong, this is an ill-advised method of going about selecting a managing agent.  The ‘word of mouth’ method is good to consider but always remember to do your research well.

We suggest the following key factors for consideration:

• Ensure that your managing agents is a registered agent, with proof available. The managing agent should be in possession of a valid and current, Estate Agency Affairs Board Fidelity Fund Certificate.
• Research the managing agents work, with solid track records, backed by testimonials from other trustees from other sectional title schemes.
• The managing agent should have professional indemnity and fidelity insurance.
• Choose managing agents that can prove that they are able to multitask well and make your sectional title scheme a priority within reasonable time.
• Choose managing agents that show passion toward sectional title schemes and a clear love for the industry. Visit their existing sties and see how they interact with their staff.
• Be very clear about what you want the managing agent to do in your contract, the contract must state how often you will meet and the costs involved.

It can be said that the managing agency industry has become quite competitive with the passing of time. It is a competitive industry but the best managing agents will always try to provide you with the required information and will be able to communicate their limitations as well. There is certainly a good managing agent out there for you.

1.      Budget and save

What is the best way to achieve your property dreams in 2019? How can you make your property dreams a reality?  A Fitzanne Estates property management agent stated, “The best way to accomplish your property dreams is to just start saving as early as possible.”

He explained that saving is not a habit that people are used to, hence many people delay in saving for their first property. “Who likes to save and sacrifice not going out for drinks now and then or buying an additional red dress that you like but have no need of? Daydreaming about owning a property without being practical is a waste of time. Use your daydreams as a source of inspiration and start saving.”

He shared practical advice on how to start saving for a dream property, “You must first research the location and size of the dream property that you want. Find out how much you need to save for the deposit and ensure that you choose a property that is affordable,” he said.

• Have a renovations savings plan

According to a financial planner having a renovations saving plan is vital. “Let’s say you have bought your first home. But you now want to make changes, expand or upgrade your property. Having a tax free account will assist you to save money that you can utilize for renovations at a later stage.”

A Fitzanne property management agent mentioned that renovating a property is a great idea as it improves the value of your property. “Renovating your property is essential indeed however failure to make use of reputable service providers might be a regrettable move. It’s important to ensure that all your renovation plans are approved and that they add value and make sense, in case you might want to sell your property in the near future.”

• Rent out your property to make money

The Fitzanne estate property agent explained, “You can make money by renting out your investment property. Although this can be time-consuming especially the process of letting out the property and looking for the right tenant. Fitzanne Estates property management agents can help with all your property management needs.”

He added, “You can register your property on Airbnb. Several service providers can oversee the day to day management of your property. I recommend the use of a property agent because in the long run. It’s handy to have someone to deal with all finer details so as to help you select the best tenant. A dedicated property management agent will also make sure that your property is well maintained.

• Save and plan for your upcoming rental deposit

The financial planner also mentioned that saving for your next rental deposit is important. “If you move out from where you are currently renting you are only given your deposit when you move out or afterward. You can make use of it to cover other costs.

Opening a tax free account can help you save up to R33 000 per year. A tax-free account will enable you to grow your savings without paying any tax, you can save up to R 500 000 cumulatively.”

• Save to achieve your goals

The financial planner further emphasized that saving money was the only practical and critical way for people to ensure that they achieve their property goals. “Be it you want to buy a property or move into a better property. Saving will allow you to achieve your property goals with ease, start saving today for a better future,” He concluded.

Many people have challenges when deciding between buying or building a home. A local property analyst stated that, “Both options have cons and pros. However before making a final decision it’s important to conduct comprehensive research,”

Factors to consider when building a home in South Africa

Research has revealed that new built homes have lower repair costs as opposed to old ones. Stats SA 2018 mid-year report revealed that the North West is the most affordable province, when it come to the cost of construction in South Africa.

With reference to the data building cost in the North West amount to R10, 130 per square meter (sqm). This is R9, 100 less then what it cost to build in KwaZulu-Natal. KwaZulu-Natal is one of the most expansive province   ranging from R19, 230 per square meter. Hence making the North West the best place to build a home in South Africa

Before a plan is drawn, it is vital to understand that at times new complex developments and vacant stands are usually on the outskirts of urban areas. This can makes access to amenities an issue.

Many people like having full control of the building process. Building your property from scratch allows you to customise your home. This in turn gives the individual a variety of options with regards to the layout, finishes and design. In accordance to their preferences. 

Building usually takes more time and at times may result in additional expenses that might be required by the   architect or engineer. In addition Land preparation and excavation for unseen ground formations should be considered.

The size of the stands in complex developments is usually smaller that of houses that are built in older established areas. It’s also very important to work with a construction team that has a reputable record. Working with professionals is highly recommended to avoid delays or additional costs in building your dream home.

What to consider when buying a home

Buying a home in an established neighbourhood has many advantages. For instance buying a home in an established neighbourhood means that the security might be better. This is because some neighbourhoods have security companies that patrol all the time.

Established neighbourhoods have all vital amenities such as, access to public transport, schools, shopping malls, hospitals within close proximity of one another. Buying a home is also a fast process in comparison to building a property.

When the house hunting is complete, you secure the bond, the deposit is paid and buyers move in within a period of 3 to 6 months. Buying a home is a big step and it’s a rewarding process.

However it is also important to take note of the disadvantages. A Fitzanne property agent noted, “You may move into a beautiful established house in a nice leafy suburb but be surrounded by homes that are deteriorating, this will have a negative impact on your property value.

Look out for broken windows, fences and neglected gardens. Check out the designs, layout and finishes. If there is a requirement for you to make major renovations do not buy the property.”

“Some defects are invisible when you are viewing a property hence it’s important to ask many questions and make use of professional property inspectors. Before making a final decision between buying and building make sure that you consider all important factors,” he concluded.

According to a Fitzanne Estates property agent 2019 is a good year for first time home property buyers. He noted, “2018 was a challenging year for the property market in South Africa, but so far 2019 is looking more positive.”

He explained that during the last quarter of 2018 the property market activity was hampered by economic challenges, political uncertainty and the increase in the prime lending rate to 10.25% which contributed to the slow property growth.

Better News For First Time Buyers

He said, “Although general market conditions for the first quarter of 2019 are not showing significant changes , competitive bank lending conditions and slow property price growth show a better opportunity for first time homebuyers who want to enter the home market.”

A local property analyst reflected on the demand of residential property, “ We now have a lower demand in the residential property market but despite this demand banks are competing strongly against each other making  loans more affordable and accessible.”

He added, “A Real property price growth that is negative means that the property market is affordable as wages increase by more than the property values. Property prices that are cheaper and favourable lending conditions are beneficial to first-time home buyers.”

What is the best time home property buyers to enter the market?

Rhys Dyer CEO of Ooba a home loans provider explained the best time for home property buyers to enter the market.

 “This is the ideal time for prospective first-time homeowners, including those without deposits, to enter the property market. 80% of our 100% bond applications in Q4 18 were approved compared to 72% in Q4 17.

While applications to Ooba by First-time Buyers increased by 3% year-on-year, our 100% bond applications showed an almost 7% increase over the same period.

“Although this is indicative of the demand for 100% bonds from first-time buyers, we are also seeing more second-time buyers successfully applying for 100% bonds. Buyers are finding it increasingly difficult to raise a deposit due to the challenging economic conditions and banks are more prepared to offer customers 100% bonds,” adds Dyer.

What is the #1 tip for first time home property buyers?

A Fitzanne Estates property management agent the most important tip for first time property buyers in South Africa, he said, “We advise first time home property buyers to shop around to get the best home deals available. Potential homebuyers must use free home loan comparison services that are available online for free.”

Rhys Dyer concluded by adding, “Prospective homebuyers should take advantage of this positive lending environment. Given the competition, amongst banks for new customers. We pre-qualify our buyers to make sure they shop in the correct price bracket, allowing them to confidently negotiate a satisfactory price knowing that getting bond finance is a mere formality.”

A real estate agent from Fitzanne Estates recently shared vital tips that you can use if you want to buy real estate in South Africa.

1. Make use of professional real-estate agents.

“People who want to buy real estate must make use of the best real-estate agents in town. Real-estate agents are professionals. They provide advice and guide you through the entire process of purchasing a property.

If you work with a reliable real-estate agent company, you are bound to get the best possible price in the shortest amount of time,” he said.

2. Conduct research on the current market.

Real-estate values fluctuate due to various reasons. Value fluctuations can be caused by broader national economic considerations. Its important to arm yourself with all the relevant market information before making any decision to buy hence conducting thorough research is essential.

3. Choose the best location available

According to the Fitzanne Estate agent, selecting the best location is essential. To ensure that your property investment continues to grow in value choosing the best location is key. “Explore the surrounding areas to check what sort of infrastructure exists. How bad or good is the security of the area?

Does the property have access to various modes of transport? Are schools around the area? Your reasons for the purchase can help you determine the best location.”

4. Understand the seller’s situation.

“Do not be afraid to ask sellers of the property questions. Get as much insight as you can to understand the motivation behind the selling of the property. Ask the seller and the estate agents any questions,” he noted. He explained that if a seller is in a hurry or under pressure to sell chances of them accepting a low offer will be high.

5. How long has the property been on the market?

The duration that a property has been on the market is essential. “If a house has been on the market for a longer period, it might be overpriced for current market conditions. Astute buyers normally get price cuts especially from buyers who are very desperate.”Knowing how long a property has been on the market can be to your advantage.

6. Research comparable homes.

The value of a home is governed by the current market. Most property markets are usually localised hence understanding prices of similar homes is essential. Comparative research can be easily done online. “Inventory of homes for sale in a specific location gives the house hunter the leverage to negotiate aggressively on the price.”

7. Think beyond price

The price is not the only negotiable. “Buyers must consider asking for concessions on items of repair or improvement or transaction costs” Its difficult to make any negotiations with newly built homes or developments. Buyers can gauge how fair an asking price is by purchasing a property valuation report or consulting an estate agent.

8. Choosing a mortgage

Make sure that you select the best mortgage that is available. Many banks in South Africa have recently eased their lending requirements. A deposit will enhance chances of home loans being approved at a quick and favourable rate.

This is where originators are invaluable, as they are able to approach multiple lenders, ensuring a higher probability of approval, as well as securing competitive terms. Their job is to shop your application around at all lenders in order for the banks to compete for your business, thereby securing the best deal possible.

9. Review structural aspects.

Before you purchase a house you must consider structural aspects.

Patent Defects: These are flaws that are clearly visible, they include wall cracks, sagging gutters, broken windows, missing tiles. A buyer must be aware of the general condition of the property.

Water pressure and geyser condition. Ensure that you turn on all the taps to check the water pressure. Also find out how old the geyser is. Also check that toilets flush properly.

Approved plans for all alterations. Consult the local municipality to find out if all buildings within the property that you want to invest are approved and fall within the building plan.

He noted, “If certain illegal alterations were carried out, you would be liable to rectify these alterations. This includes application costs for approval of the plans. The structure can be demolished if it does not conform to municipal regulations.”

10. Making an offer

Adequate research on the prices of recent sales in the area is vital before you make any offer. As a buyer you must be aware of the current property market conditions. Gauge how fair an asking price is. He concluded by stating,”Consult with the best estate agents or purchase a property valuation report.”