News from Rawson Properties

IT IS ESSENTIAL TO CHECK THE FINANCIAL POSITION OF SECTIONAL TITLE SCHEMES BEFORE BUYING, SAYS RAWSON MD

Addressing a meeting of Western Cape Rawson Properties franchisees, Tony Clarke, the MD of Rawson Properties, told them that anyone from Rawsons involved in sectional title schemes must help the buyer to assess the scheme thoroughly before signing an agreement to purchase.

Bodies corporate of sectional title schemes, said Clarke, by law have to hold an annual general meeting within four months of their scheme’s financial year end.

Traditionally, financial years run from 1st March to the last day of February but this time period can be changed if a meeting of the owners and/or the trustees agree on a different time period.

As auditors are always hard pressed from March to June, it can, said Clarke, make good sense to end the financial year out of their busiest accounting period.

For the annual general meeting, said Clarke, the body corporate is required by law to report comprehensively and clearly on the financial position of the scheme. This means that their statement must include a full balance sheet, a review of cash flows, any changes in equity over the last year, all outstanding debts owed on special levies and all members’ levies and other debts (e.g. maintenance) in arrears.

“Never ever,” Clarke told his franchisees, “allow your clients to buy into a sectional title scheme without first seeing an audited, up-to-date balance sheet.”

This advice, he added, is particularly relevant right now because the number of sectional title schemes being declared insolvent is on the increase – and any scheme in financial difficulty will always lose value, sometimes drastically.

The situation on schemes where many members are behind in their levy payments is complicated by the fact that any member who is behind will not be given a clearance certificate, without which he cannot sell his unit. Any scheme in which several members are in this situation will be heading for bankruptcy.

Sectional title apartment blocks, added Clarke, are the fastest growing sector of the residential property market – but, as he has indicated, buyers must check them out thoroughly before signing a purchase agreement.

Article by: www.rawsonproperties.com