03 Jun 2013
If you’re considering buying a sectional title property for the first time, there are many things to consider and investigate before choosing the scheme in which to buy into.
This is according to Johann le Roux, executive director of Propell, who says they have come across cases where the overall “look” of the scheme is good but after the buyer has signed the offer to purchase, he starts asking pertinent questions. "It is better to get all the information upfront and not have to change plans because of something that was not considered when buying."
The first thing to do would be to get a copy of the sectional title plans. Read and understand the description of the unit, the extent, the section number and the participation quota (on which the levy amount payable each month will be based). Ask for the exact amount of the levy for the unit and the exclusive use area.
He warns buyers to be wary if the levy seems low in comparison to other schemes as it could be a sign that the budget is inaccurate. "Check the budget yourself to be sure that the trustees have set the right amount and that all the operating expenses of the scheme will be covered each month."
There might be an exclusive use area attached to the section and it should be listed on the section plan. The question to ask here is whether it is registered to the unit properly.
If the unit has had any changes made to it, such as an extension or a balcony enclosure, check if the sectional plan has been amended to show the alteration and that the right procedures were followed. All changes to units must be approved by the trustees and if the alteration is not on the plan, it is illegal.
Carefully inspect the condition of the features and structures on the common property to ensure that they are in good repair. The things to check here would be the lift, security gates, the perimeter fence and gates to the complex. When buying into a sectional title scheme you become a member of the body corporate and will be jointly responsible for all of these, Le Roux says.
Ask if there are any rights reserved by the developer to extend the development further and if this is likely to affect you, and request to see what the plans might be for these extensions.
Read and understand the management and conduct rules of the scheme, and be sure that they are a current and updated version. “Be wary of house rules as they may have no legal standing,” he says.
Ask for a copy of the financial statements, the levy roll, budget and recent AGM minutes. The bank will ask for the financial documents in order to approve a bond - it is best to check these beforehand so that time is not wasted applying for a bond which is not likely to be approved due to financial mismanagement.
“You would not want to buy into a scheme that is in financial trouble or shows signs of not being managed properly, as this will affect the value of your investment,” he says.
Ask about the arrear amounts and how many of the owners are in arrears, and ask what is being done to collect the amounts outstanding.
If there is any question about the financial records’ accuracy, ask for the municipal account payments, just to be sure that they are up to date, says le Roux. Another thing to check is whether there is any chance of a special levy being raised or in place and check the terms of these levies.
Le Roux says you don't want to end up in a situation where you have just bought a unit and are told that there is a large special levy amount that is due by you.
These are just steps towards owning a sectional title unit, which if followed, could eliminate problems or issues later. He says if there is any difficulty finding out all of this information before you buy, it's a sign that there is something amiss in the running or financial health of the scheme and you might have to investigate further. "The bottom line is that all the investigative work must be done before signing an offer to purchase: do not start asking questions when it is too late.”
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