Know your body corporate rules (Adrian Goslett 18 March 2011)

28 Mar 2011

While living in a sectional title scheme offers a certain level of security to a safety-conscious South African society, problems can arise if those buying in to this type of investment do not read the fine print of the body corporate rules and ensure that the scheme is in sound financial order.

There are a number of reasons that the sectional title model has proven to be so popular in this country. Living in this type of environment can save homeowners money because basic charges for water and electricity supplies are shared among owners and, as such, are usually lower than in a full-title property.
Generally speaking, the costs of maintaining the unit are also lowered because exterior maintenance work is carried out by the body corporate itself. In addition homeowners have the added advantage as levy payments usually encompass future maintenance costs, thus removing the need to budget for expensive repairs.
However, there are rules governing these schemes and anyone considering investing needs to ask an agent for a copy of the body corporate rules before signing a sales agreement.
These rules establish what the current owners find acceptable within the confines of the scheme and lay out exactly what a buyer can and can't do once the purchase has taken place. These rules are not made on a whim and the regulations applicable to the scheme must be registered in the Deeds Office in order for the rules to be enforceable.
One of the more contentious issues revolves around pet ownership. Buyers should never assume that just because they have seen a small dog wandering around the complex that this means that the trustees allow unit owners to keep pets in the complex. It is always advisable for homeowners to confirm in writing with the body corporate that they do indeed allow pets on the premises.
Anyone considering buying into a scheme should also request to see the financial statements of the body corporate as this will give a clear indication of the liquidity of the scheme. It is essential to ensure that there is enough money in the kitty to take care of not only the day-to-day expenses, but also any planned or unplanned maintenance costs.
Special levies are also very often a bone of contention. Sellers often fail to disclose that a special levy has been introduced to cover additional expenses. With this in mind, it may also be a good idea to ask to see the minutes of any meetings held by the trustees in the preceding 12 months as these can often alert potential homeowners to problems that the complex is currently experiencing.
Lastly, it is good practice to ask to view the sectional title plan of the scheme and to make sure that all buildings reflected on the sectional plan are municipally approved. If this has not been done, the current owners of the scheme may well end up bearing the costs associated with legalising the process, including the costs of having the site surveyed, legal costs and the fees of re-registering the scheme in the Deeds Office.
As with any property investment buyers need to do their homework thoroughly. For those investing in a sectional title scheme, the body corporate rules are the best place to start.
*Adrian Goslett is the CEO of RE/MAX of Southern Africa