Sect. title for dummies 2

How do the rules of the scheme restrict the use of your unit?

Every sectional title scheme is governed by the Act but each scheme may have different management and conduct rules which are in place to regulate the way the scheme is run and the way in which the owners and occupiers behave. All owners and occupiers are bound by the scheme's rules so even if you are a buy-to-let investor you are responsible for ensuring that your tenants are aware of the rules (you are obliged to attach a copy of the scheme rules to your written lease agreement) and abide by them. The rules of a scheme can be incredibly restrictive and therefore it is essential that you read and understand the rules before committing to being bound by them when buying into the scheme. If you own pets, check the rules to see if pets are allowed in the scheme — resident owners regularly suffer enormous heartache when they buy into a scheme, move in and are given notice that the scheme's rules do not allow pets. Buy-to-let investors likewise may need to ascertain whether short-term letting is restricted as many schemes have rules which do not permit leases of less than three to six months.

Any changes which you wish to make to the common property will need trustee and/or body corporate approval. If you want to place an air conditioning heat exchange unit or a satellite dish outside your section, these first need to be approved by the body corporate. Remember that anything outside of your section is common property and therefore co owned by all owners of sections so even minor changes to it need prior body corporate approval. If you have an exclusive use balcony area which you wish to enclose, you cannot simply get approval of your building plans by the local authority and go ahead with the enclosure, you need to get the trustees to sign your building plans before the local authority will approve them. In short, sectional title ownership involves a community aspect which restricts an owner's use far more than conventional title. In sectional title your interests are not the only interests that are to be considered and the body corporate constitutes an additional layer of governance to which conventional title is not subject.

You may get a copy of the rules from the estate agent, the managing agent, the seller or your local Deeds Registry. Check them to see if there are any rules which you are not happy to abide by. It must be noted that some rules are not absolute and can be amended, substituted or deleted, but the procedures and levels of agreement amongst owners required to achieve this often make it difficult to do so.

Things to look out for

  • The financial status of the body corporate

    The body corporate is responsible for maintaining and repairing the common property and if the body corporate is in debt, your investment could suffer dramatically. The financial position of the scheme and any reserve funds can be checked by obtaining a copy of the financial statements adopted at the last AGM of the body corporate — ask the estate agent, seller, trustees or managing agent for a copy of these and inspect them.

  • Is the scheme subject to future development rights?

    If the developer or the body corporate has future development rights to extend the scheme, these rights must be disclosed in every deed of sale for units in that scheme. If you sign a deed of sale and find out afterwards that the developer or body corporate hold future development rights which were not disclosed in your deed of sale, you are entitled to walk away from the contract.

  • Are you buying off-plan?

    It is not unusual to buy a unit in a sectional title scheme before the scheme has been registered or even before the building has been built. If you are buying 'off plan', as sales of this nature are often called, the latest date of completion must be stipulated in the deed of sale. You should not pay any money directly to the developer until the certificate of completion has been issued. Money may be held in trust, either by an attorney or an estate agent, on the developer's behalf until the certificate of completion is issued, but the developer is not entitled to receive any consideration until then.

Conclusion

Knowledge is power. If you are buying into sectional title, the more you know about this type of title, the more likely you are to protect your investment. So before you buy, take the time to investigate the scheme fully and once you're a sectional title owner keep your finger on the pulse of the body corporate by attending meetings. Consider becoming a trustee, or even the chairperson so that you are able to maintain control and are not hit with any nasty surprises.

Article by: www.paddocks.co.za