APARTMENT living, with its secure, lock-up-and-go lifestyle, is becoming an increasingly sought-after home ownership option among first time buyers.

Despite obvious benefits, however, there are some aspects of this type of property ownership that are confusing or even off-putting for the uninformed, says Mike Bester, c.e.o. of national real estate group Realty 1 Elk.

Essentially, there are two main options for flat ownership in South Africa, he says. More popular and prevalent is sectional title ownership, whereby purchasers own the property and the title is registered in their name.

Less common and often maligned is the share block option, he says, in which purchasers end up owning shares in the company that owns the block rather than any tangible property.

"There are advantages and disadvantages to both forms of ownership," stresses Bester, who suggests that novice buyers seek advice from either an experienced estate agent who specialises in this particular sector or a property attorney, prior to making any decisions.

Property attorney David van Onselen, of Van Onselen O'Connell Attorneys & Conveyancers, points out the choice of system depends largely on the financial circumstances of the individual buyer since sectional title ownership is invariably the more expensive of the two.

"Little, if any, criticism can be leveled at a well-run and efficiently controlled share block system," he says. "Such systems have been successfully and soundly operational for many years, to the decided advantage of the participants. On the other hand, the two dominant factors relative to sectional title, namely that you acquire the title to the asset you're buying and that mortgage finance is generally readily available, make this system the more popular of the two."

Comparing the two systems, Van Onselen says the main disadvantages to share block ownership are the psychological obstacles in the minds of buyers, and limited funding options. Mortgage bond finance is readily available for sectional title properties owing to the fact that owners acquire title to their assets, but banks rarely fund share block purchases, and when they do, it is more often than not in the form of an expensive loan, he says.

Further, while sectional title owners do not require consent from the trustees when buying or selling their units, some of the requirements of the Share Blocks Control Act could be onerous, especially in the case of re-sales. Directorial consent is required for the sale and transfer of shares as well as the letting of share block units.

However, there are also downsides to sectional title ownership, he notes, including a lack of control over owners when it comes to dealing with misconduct issues. In contrast, share block schemes are easier to control because contractual restraint can be imposed on shareholders. If they are in default, their share block right to use or occupy their unit can be declared forfeit and sold, Van Onselen explains.

And while sectional title purchasers can only take transfer of their units once the sectional title register had been opened, share block schemes are easily set up so that units are often less expensive initially, he adds.

When shopping around for a flat, Van Onselen says it is important for purchasers to establish the financial position of the share block scheme and to find out whether there are any mortgage bonds over the property.

"In terms of the Share Block Control Act, the seller is obliged to make a full disclosure of the position regarding the company, and from this information you should satisfy yourself that the company is sound," he says. "If the seller doesn't give you this information, you have the right to withdraw from the sale."

Article from: The Tyger Burger - www.news24.com