Sectional title – check the finances

Anyone who is considering buying a flat or a complex under sectional title should carefully check the financial status of the scheme before going ahead with the purchase according to Johan Le Roux, marketing director of Propell a company that funds 330 local sectional title schemes with 15 000 units.

Le Roux says that all too often an unsuspecting buyer may buy a unit in a sectional title scheme and may be told that the levy is, say, R700 a month. When the sale is concluded, the buyer discovers that a special resolution was passed by the body corporate increasing that levy by a factor of two or three.

“There is always a danger that people can buy a unit in a sectional title scheme without examining the financial standing of that scheme,” says Le Roux. “Estate agents are sometimes guilty of selling units without doing the necessary research and homework and without advising their clients about the dangers that surround inefficiently-managed section title schemes,” he says.

Le Roux stressed that if a scheme raises a special levy, this does not necessarily mean that its trustees for the managing agent have been incompetent.

Referring to the role of Propell in sectional title schemes, Le Roux says that the company is able to provide funds and assist in a sectional title scheme’s monthly cash flow requirements and can collect levies from owners on behalf of the managing agent or the trustees.

In a separate development, sectional title specialist, Mike Spencer warns that trustees of a body corporate must work within the rules of that body corporate and often make a mistake when it comes to properly maintaining the buildings.

“One area where trustees frequently make a bad mistake is on the exterior maintenance of a building or complex. Rule 37 says that the body corporate (and therefore the trustees) must establish a fund sufficient for the repair, upkeep, control, management and administration of the common property,” says Spencer.

He says that over the years, some trustees have tried to lower the levies by insisting that owners repaint the outside of their own units but this is outside of the provisions of Rule 37 and must not be allowed.

“Trustees have to set a budget, used to calculate the levy repayments, that is sufficient to cover the repainting or other maintenance costs of the outside of all the units. They do not have a choice,” he says.

“Recently, when visiting a unit owner by a foreigner, we noticed that the outside of this property was in a poor condition but all the other units had been freshly painted. Looking at the financial statements for the past year, it was clear that no money had been spent on maintenance by the body corporate.

“I suggest that the trustees for this scheme had been grossly negligent and should be held personally liable because Rule 37 clearly states that the body corporate must maintain the exterior of all units in the complex,” says Spencer.

“Trustees have to be very careful when making decisions to cut corners on the levies charged. It can only be done if everyone agrees to the changes. Otherwise trustees need to stick to the rules,” says Spencer.

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The development, to be known as Coral Heights, will comprise of 114 apartments and 42 garages in six blocks. 

Coral Heights will be part of a larger housing development called Melkbosch Village, which will include a mix of affordable housing, sectional title apartments, subsidized housing and upmarket plot and plan homes.

The project will offer 44 two bedroom ground floor apartments selling at R479 900, 44 two bedroom first floor apartments that will sell for R349 900 and 32 two bedroom second floor apartments selling for R399 900.  The floor size of each unit measures approximately 55m² and all prices include VAT and transfer costs.

Construction has commenced and is due to be completed by March 2011.

Melkbosch Village is located on the corner of West Coast and Melkbosstrand Roads in Melkbosstrand and comprises of seven precincts within the village, developed in two phases. Phase one, which is now complete, involved installing services and infrastructure for the entire development, as well as the construction of two upmarket plot and plan precincts and one upmarket apartment block in a sectional title scheme known as Manatoka Heights.

Richard Thomas, divisional executive of the Cape Division of Nedbank Corporate Property Finance said that the bank funded this development because of the calibre and reputation of the developer.  “Asrin is well known to the bank and has a hands-on management ethic.  They adopt a conservative approach to developments and mitigate risk by pre-selling stock ahead of construction.  Another factor that made the development attractive is the huge demand for affordable housing on the West Coast – something that Asrin will help address with this development.”

Manie Annandale, Head of Nedbank Corporate Property Finance’s Affordable Housing Development Unit said that this regional initiative by Nedbank Corporate Property Finance bodes well for strengthening the bank’s reach into the Affordable Housing market. “Consumers are still under pressure when it comes to proving affordability for the various home loan products offered by the banks, which means that these homes in the lower price range of the market will provide a welcome alternative to prospective buyers.”

Coral Heights will be developed by Asrin Property Developers, one of Cape Town’s leading black empowered property developers.  Recent landmark developments completed by Asrin include “The Gem” Eden on the Bay, a R500 million mixed-use residential, offices and retail development in Bloubergstrand completed earlier this year. 29 Sep 2010 – eProp – NCPF

Remember by choosing us for a Affordable Housing loan, you will get professional advice to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za