Sect. title: Avoid a mess

Ulrik Strandvik of Grant Gunston Attorneys, an experienced Cape conveyancer, says that buyers moving into what is now the fastest growing sector of the SA residential property market, sectional title schemes, often do so with far too little research and awareness of the potential problems.

"The first, all too common, mistake," said Strandvik, "is to sign a purchase agreement without checking on the financial health of the scheme. Every purchaser is entitled to ask for a copy of the scheme’s latest financial statement – but very few do."

With anything up to 30 percent of SA’s sectional title schemes in arrears on levy payments, said Strandvik, failing to check on the financials can lead to disastrous results.

"Quite often the new purchaser will find that within one year – or less – he is being held liable for debts incurred by the scheme prior to his purchase and/or that he has to contribute to a big special levy for the maintenance, repairs or other expenses of which he was not warned at the time of purchase."

If the purchaser wants to raise a bond to pay for the property, the banks, said Strandvik, will insist on seeing the scheme’s audited financial statement. This, he said, has saved many a purchaser from buying into a scheme in trouble.

Another big mistake, said Strandvik, is to fail to investigate or to misunderstand the exclusive use rules of the scheme.

"Ideally," he says, "these should be depicted on the sectional title plans. If they are, the buyer’s rights will have been recognised at the outset and he can notarially cede or bond the exclusive use area if he needs to.

"However, developers often opt for the less expensive alternative of allocating the exclusive use rights on each unit in the management/conduct rules. If this procedure is followed the owner cannot notarially cede or bond it. He merely has a personal right against the body corporate for the use of the exclusive use area.

"What is more, should the exclusive use area be allocated in terms of the conduct rules, if 75 percent of the members vote in favour of a special resolution, the body corporate has the right to re-allocate that exclusive use area to another owner – to the detriment of the current owner."

Most commonly affected by the exclusive use rulings, said Strandvik, are parking bays.

"The owner deprived of a parking bay could be in serious trouble because certain SA banks will now not grant a bond to a sectional title unit if as if it has no parking."

Often, says Strandvik, a purchaser will buy into a scheme and take over an exclusive use area without realising that he has no legal title to this, but merely a personal right in terms of the rules of the scheme.

"Another concern is that the trustees may well have given the go ahead to extend a section onto common property (such as extending a patio) but in doing so they may not have registered the changes with the Deeds Office. The trustees’ consent alone is not sufficient to secure the owner’s legal right; all owners will need to agree to it in terms of the governing legislation. Furthermore, it is imperative that these changes be documented on the sectional diagrams by a land surveyor and then registered at the Deeds Office for the changes to be effective.

Much the same, said Strandvik, can also happen when the trustees change the rules of the scheme.

"Any changes to the rules must be authorised by the body corporate in terms of the Act and be lodged at the Deeds Office to be effective. If the scheme does not register its own version of the rules or amended rules, then the rules in terms of the Act will prevail. As a potential owner it is important to understand which rules govern the scheme; the rules in terms of the Act or the schemes own tailored rules.

"The purchaser, for example, may have bought into a scheme on the understanding that its rules forbid children or pets or to live there. However these rules may be amended rules which have not been lodged at the Deeds Office. Another owner could then argue that he does in fact have the right to have a pet on the property as the registered rules do not prevent this. It is therefore important to investigate this before purchasing a unit in a scheme to avoid potential issues in the future.

Article from: www.iafrica.com