Sectional title property: Know the rules

Sectional title has become one of the most popular forms of property ownership in South Africa. But do buyers really understand the rules governing and protecting them once they move in?

Bester says further to the provisions of the Sectional Titles Act, a sectional title scheme is governed by the Regulations to the Act and the Management and Conduct Rules of the development as registered in the Deeds Office.

Increasingly buyers are choosing to invest in sectional title schemes because of factors such as the level of security and the community lifestyle, as well as the affordability compared to full title homes, and the reduced costs of maintenance.

Martin Bester, Managing Director of Intersect Sectional Title Services, says it is important for buyers who are looking to invest in these schemes to know their rights and obligations when it comes to sectional title.

People often confuse ownership of property governed by a homeowners’ association with that falling under a body corporate, which is governed by the Sectional Titles Act, he says.

According to Bester, who sits on the board of the Residential and Sectional Title Committee of SAPOA and is an alternate member of the Sectional Title Regulations Board, further to the provisions of the Sectional Titles Act, a sectional title scheme is governed by the Regulations to the Act and the Management and Conduct Rules of the development as registered in the Deeds Office.

Study the rules and regulations

It is essential to obtain, and study, a copy of the body corporate rules and regulations before buying into a sectional title scheme, says Bester.

These rules govern the owners within the confines of the scheme, he explains, and the rules also lay out what is acceptable general conduct in and around the complex as well as specific issues such as pet ownership.

Bester says once a body corporate has been established, owners can only change the Management Rules by means of a unanimous decision and the Conduct Rule by means of a special resolution.

Check the financial statements

When buying into a sectional title scheme, it is also important to ensure that the scheme is in sound financial order, explains Bester.

He says buyers can request to see the financial statements of the body corporate to assess the liquidity of the scheme.

Sectional titles and insurance – are you covered?

Bester says many people are under the mistaken impression that the body corporate’s insurance policy covers movables such as furniture and curtains as well as the buildings, common property, and all fixtures within the sections. However, this is not the case.

Prescribed Management Rule 29(1)(a) places a duty on the trustees to ensure that the buildings and all improvements to the common property are insured from the very beginning, and thereafter renewed every year, he says.

The onus for insurance on moveable items falls on the individual residents, he explains.

“At Intersect we advise our clients to have the buildings and improvements professionally valued every three to four years, so as to ensure that the replacement values applied are reasonable and accurate.”

Can you extend your section?

Under Section 24 of the Sectional Titles Act, any owner wishing to extend his or her section needs to apply to the body corporate for approval, says Bester.

On receiving this approval, which must be in the form of a special resolution of the members, the owner must arrange a draft sectional plan of extension, which is then submitted to the Surveyor General for approval, he explains.

A land surveyor or architect must also confirm that the proposed extension does not exceed the 10 percent extension threshold, currently in place, says Bester.

Amendments to the Sectional Titles Act

Recent welcome amendments to the prescribed Management Rules, Annexure 8 of the Sectional Titles Act of 1986, were published in the Government Gazette in September 2011.

One such amendment is the insertion of rule 31(2A), which states that the budget of the body corporate shall run concurrent with the financial year of the scheme.

According to Bester this, in turn, led to the amendment of rule 36 (1) which now provides for the trustees to prepare the budget, prior to year end, and to lay this budget before the members at the AGM.

Whereas in the past many budgets were ‘on hold’ until the AGM was held and the budget approved by the members, sometimes putting strain on the cash flow of the body corporate, he says.

Another amendment, which according to Bester will save time, costs and importantly, resources, is the substitution of rule 39, which now allows for the delivery of documents by means of facsimile or email, provided that the owner, in writing, consents to receiving same in such a manner.

Other such changes that will affect Sectional Title and Community Schemes are the Sectional Titles Schemes Management Act and the Community Schemes Ombud Services Act.

Sectional Titles Schemes Management Act

Bester says it is largely believed that the Sectional Titles Schemes Management Act, when promulgated, will assist body corporates to manage and regulate sectional title schemes, including the application of the rules and to establish a sectional title schemes management advisory council.

According to Bester, the Sectional Titles Schemes Management Advisory Council will be tasked with making recommendations and advising the Minister on the provisions of the act, as well as keeping the implementation of the Act and the regulations under regular review.

Community Schemes Ombud Services Act

The Community Schemes Ombud Services Act, when promulgated, aims to provide for the establishment of the Community Schemes Ombud Service and a dispute resolution mechanism in community schemes, says Bester.

It is envisaged that the Ombud service will investigate and adjudicate claims and complaints against managing agents or other employees of community schemes, such as sectional title body corporate’s, home owners associations, shareblock schemes etc., and should have jurisdiction to rule on certain aspects thereof.

It is also hoped that this service will provide both the trustees and the residents within community schemes the platform to resolve disputes in an orderly, fair and equitable manner, he says.

Buyers must remain savvy to the rules, regulations and governance pertaining to Sectional Titles and Sectional title units will continue to be popular among security conscious buyers in the future and provide a good return on investment if the principles of buying property are adhered to, he says.