RESIDENTIAL FREE HOLD PROPERTY VS SECTIONAL TITLE SCHEMES
Category Useful Information
Examples of residential freehold properties are vacant stands, regular stand with a house (these could also be situated in estates or complexes), farms, plots, smallholdings and so on. The two main types focused on below are Residential Free Hold Properties and Clusters & Estate Living.
Flats, Town Houses, Semi-detached houses and Holiday Apartments, are all examples of Sectional Title Properties.
Clusters and properties in secure estates are also free to hold properties and although you (or you and your co-owner) are the sole owner of the property and have "full rights" over the property, the rights are subject to the Home Owners Association (HOA) or Management Committees rules and regulations. All the owners within the Development form part of the HOA and there is a committee appointed, usually at an annual general meeting of all the owners, to carry out the day to day running and management of the HOA.
You own the land and all its permanent structures, although you may have restrictions regarding the exterior appearance of your home or the nature of the improvements you are allowed to make to your property.
So, let's break it down:
Residential Free Hold Properties
When you own a residential freehold property, you (or your co-owners) are the sole owner of the property. You have full rights over the property, no governing body to answer to (except the local authority), no rules regulating your conduct and no levies to pay. You own the land and all its permanent structures. You are responsible to maintain it and for the rates and taxes payable to the local authority.
"Boomed Off" areas or road closures are common, with crime being a problem in South Africa. Residents are trying to keep their homes and families safe and are taking crime prevention into their own hands and road closures generally increase security in a community. Structures are put in place to make it difficult for criminals to enter and escape and more possible for community members and security companies to alert the police to known criminals.
Proper procedures need to be followed and permission granted by the relevant authorities for permission to be granted for an area to be closed off legally. All residents involved are required to pay a monthly levy and occasionally an additional "special levy" to pay for out of the ordinary expenses, like shortfalls created due to certain residents not paying their levies, installing extra security measures and so on.
Road closures are a worldwide phenomenon, effective in protecting residents against crime. Other countries that have similar infrastructures and programmes include Germany, Ireland, France and America.
Clusters and Estate Living
You are responsible to maintain the property and for the rates and taxes payable to the local authority. You will also be liable to pay levies for maintenance and insurance, the upkeep of common areas, security systems, staff management fees and so on.
In return for all the rules and regulations, you enjoy the benefits of additional security, harmonious common areas, protection of the value and even rises in the value of your property.
Security forms an essential part of cluster living and includes 24-Hour security, guard on-site, CCTV Cameras and Electric Fencing.
Sectional Title Schemes
- Common Property and Exclusive Use Area -
All owners jointly own the land itself as well as the common property. Common Property comprises areas like staircases, lifts, corridors, communal washrooms, driveways, roads, recreation facilities, entrance areas, the exterior of the building and so on. Exclusive use areas include carports, staff quarters or store rooms, which are used solely by the individuals entitled to use them (or in some instances, these are rented from the body corporate).
- The Body Corporate -
The Body Corporate is responsible for the control, administration and management of the scheme. All the owners of the units in the scheme form the body corporate. At an annual general meeting of all the owners, trustees are elected to carry out the day to day running of the scheme. The duties of trustees are:
- Ensuring Levies are collected on time
- Arranging regular annual general meetings (AGM)
- Running the sectional title scheme efficiently
- Controlling, managing and administering the common property areas and the body corporate assets and affairs
- Making sure owners and tenants comply with the scheme's rules and provisions of the Sectional Title Act of 1986
- Making sure that the schemes buildings and assets are insured to the replacement value
- Raising special levies when unforeseen expenses occur
- Making sure the common property is maintained and repaired where necessary
Not all trustees have to be owners. One can become a trustee by being elected at an annual general meeting
- Rules and Regulations -
The scheme is managed by two sets of rules set by the Body corporate/ Developer:
- Management rules - These are provisions regarding the management, i.e. how trustees are elected, their obligations, the voting procedure at annual general meetings, etc
- Conduct rules - More commonly known as 'House Rules' these regulate the conduct of the owners and tenants, i.e rules regarding driving speed within the property, the number of pets allowed, etc
The Body Corporate can by a special resolution (75% majority vote), amend, add or delete any conduct rules.
- Levies -
Every owner makes a monthly monetary contribution to a fund for the general expenses of the scheme generally referred to as the Levy.
The Levy may include:
Rates and Taxes payable to the local authority by the scheme, although individual owners are responsible for paying their own rates and taxes.
- Electricity costs for the common areas
- Insurance replacement costs of the building
- Provision for anticipated maintenance expenditure
- Managing agent fee
- Annual audit fee
- Complex security
- Common Property garden services, etc
- Building alterations-
Requires the approval of the Body Corporate and the Local Authority. The owner must go through the necessary chain of events like getting the sectional title pan for subdivision/ extension to draw up and getting the building plans drawn up and applies to the Deeds office to register the alteration.
When looking at purchasing a Sectional Title Scheme ensure the agent furnishes you with the following information -
- The rules of the governing scheme
- The name of the trustees of the body corporate and the managing agent
- The amount of the levy payable in respect and whether any increase is anticipated
- The extent to which the body corporate has made provision for future maintenance of the scheme
- Financial statements of the body corporate
Author: Futuredev Properties