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Tips for going from renting to buying in sectional title schemes

30 Oct 2019

When you go from renting in a sectional title (ST) complex to buying your own apartment or townhouse in the same complex or another ST scheme, it’s easy to assume that nothing much will change, except that you will now be responsible for the levy instead of your landlord paying it.

“Homeownership is really different to renting, and those who plan to make the change should be well prepared," says Schaefer.

“Many young people find themselves in this situation as they transition from being tenants to buying their first homes. However, it’s not just a case of exchanging rent for a home loan repayment and adding the levy,” says Andrew Schaefer, MD of national property management company Trafalgar.

Homeownership is really different to renting, and those who plan to make the change should be well prepared. For example, buying into a ST scheme will immediately make you a member of the body corporate, with responsibilities towards your fellow members when it comes to protecting the value of all the homes in your complex, as well as the right to help decide how it should be run and what the levies should be.”

For this reason, he says you must make sure that any ST scheme you are considering buying into is financially sound, meaning that there are no large levy arrears, that there is a sizeable reserve fund for planned and emergency repairs, that the body corporate is not in debt to the local authority or any service providers, and that the scheme’s insurance is up to date.

“In addition, you should check that the complex is professionally managed by an accredited managing agent company. Most ST owners and their elected trustees are not legal experts or property professionals, so they need the support of qualified and experienced managing agents when it comes to the financial management, administration, governance, payroll and the many statutory reporting obligations of ST schemes,” says Schaefer.

“The importance of this becomes even more evident when one considers the combined value of the property assets involved - and the lifestyle and financial implications for owners when schemes are not well managed and become indebted and rundown. In such instances even those owners who have paid their levies are at great financial risk.”

Schaefer says other things to think about while preparing to buy a ST home include the following:

1. Location and amenities

When you tire of a rented home, or there are changes to the area that you don’t like, it is relatively easy to give notice, pack up your belongings and leave. Selling a home you own is much harder and can be a lot more costly, especially if you decide to move within a couple of years. So you need to think long term when buying, and that means taking a good look not only at the ST complex itself, but at the surrounding area to ensure that it will meet your needs in the future. Consider elements like shops, schools and public transport as well as personal safety, proximity to work, the age of the area and the overall condition of the other homes and complexes there.

2. Neighbours and rules

When you buy into a ST complex, you are also buying into a closed ‘neighbourhood’ where you will need to work with other owners to ensure that it is funded, maintained and secured, and that everyone’s investment is protected. So you need to check out your prospective neighbours and feel comfortable that you will be able to establish friendly relationships with them. You must also read the scheme’s management and conduct rules before you sign an offer to purchase to make sure these don’t clash with your own lifestyle or plans for the future.

3. Levies and rates

One of the main reasons people buy ST homes is that they don’t have to spend time on gardening or home maintenance, but can pay a levy to make sure all that is taken care of by the trustees that the body corporate elects and the trustee-appointed service providers. However, ST buyers do need to make sure exactly what the monthly levy does cover, and that it includes security and their contribution to the scheme’s insurance. You also need to be aware that in addition to the levy, you will have to pay your own municipal property rates and taxes, and the premiums for insuring your own belongings. In addition, while some levies include municipal water charges, you will probably have to pay a separate amount each month for electricity.

4. Interior maintenance

While the body corporate may be responsible for exterior maintenance and the upkeep of the common property, the home owners in ST schemes are responsible for all the interior maintenance of their units. The costs of this are likely to be minimal if you are buying into a newly-built scheme, but you should still budget for emergencies because you will no longer have a landlord you can call to get things fixed. A good rule of thumb is to save 1% of the purchase price annually for home maintenance. That is R1 000 for every R100 000 of the price, and it should enable you to pay for whatever you need to replace, repaint or renovate in due course.

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