A key factor to consider when buying a sectional title property- complex management
Category Residential Property
When purchasing a sectional title property for the first time, prospective buyers often focus solely on the property itself and, although it's crucial to properly inspect all aspects of the property, it's equally important to evaluate the governing entity responsible for managing the sectional title scheme.
"The body corporate plays a pivotal role in maintaining the complex, enforcing rules, and managing the communal finances," says Cobus Odendaal, CEO of Lew Geffen Sotheby's International Realty in Johannesburg and Randburg.
"Neglecting to assess the body corporate's overall management, financial health, and effectiveness can lead to unforeseen challenges down the line.
"If it is inefficient or mismanaged, you could face various issues, including deteriorating facilities, unexpected special levies or poor security, which can directly affect your property's value and your quality of life."
Odendaal explains the body corporate's crucial role and how it affects property owners:
Shared Responsibilities: In a sectional title property, individual owners own their units, but the common areas, such as gardens, walkways, parking areas, and pools, are managed by the body corporate. The entity is also responsible for the upkeep of the exterior of buildings, including painting and structural repairs. Poor maintenance can not only affect your quality of life but also the resale value of your property.
Financial Health of the Scheme: One of the most critical aspects is the financial stability of the body corporate. If it is poorly managed and has insufficient reserves, you may be faced with special levies-additional charges to cover emergency repairs or upgrades to communal areas.
For instance, if the roof of the complex needs repair and there's not enough money in the reserve fund, every unit owner will be expected to contribute. A well-managed body corporate with solid financial reserves prevents these unpleasant surprises.
Impact on Property Value: A mismanaged body corporate can significantly impact the overall value of the entire complex and, thereby, the individual units as well. Buyers are likely to steer clear of complexes with high levies, poor maintenance, or management issues. Over time, the condition of the common property will further deteriorate, which can drag down the resale value of your property and make it harder to sell.
Enforcing Conduct Rules: A body corporate is also responsible for enforcing the rules of the complex which may include guidelines about pets, noise levels, use of communal areas, and parking. A well-run body corporate ensures these rules are fairly enforced, which helps maintain peace and order in the complex. On the other hand, a poorly managed body corporate may fail to resolve disputes or apply rules consistently, which can lead to frustration and conflict with neighbours.
According to Odendaal, the following factors should be checked when assessing a body corporate:
Financial Statements
Before purchasing a sectional title unit, ask to see the latest financial statements of the body corporate. These should provide a clear picture of the financial health of the complex. Key things to look for include:
A healthy reserve fund: This is money set aside for future maintenance and repairs. A well-funded reserve shows that the body corporate is planning for long-term upkeep, reducing the risk of special levies.
Debt levels: If a significant number of owners are in arrears on their levies, this could indicate financial instability within the complex, and you might end up paying more to cover shortfalls.
Levies
Ensure that you understand how much the monthly levies are and exactly what they cover. Levies typically go toward communal maintenance, security, and insurance. Compare these levies to similar complexes in the area - if the levies are unusually high or low, this could be a red flag. High levies may indicate poor financial management or a high-cost structure, while very low levies could mean that maintenance is being neglected, leading to future problems.
Minutes of the Annual General Meeting (AGM)
The AGM minutes offer valuable insights into the body corporate's management style, any ongoing disputes, and upcoming projects. If there are significant unresolved issues or a history of conflict between owners and the body corporate, this could be a sign of trouble. Look for any mention of planned special levies or major repairs that could affect your future expenses.
Management and Conduct Rules
Every sectional title complex has conduct rules that owners and residents must follow. These rules can cover a wide range of issues, from whether pets are allowed to guidelines on parking and noise. Make sure to review these rules before buying to ensure they align with your lifestyle. For example, if you plan on getting a pet, but the complex has a no-pet policy, it's better to know beforehand.
Maintenance and Upkeep
Take a walk around the complex and assess the overall condition of the common areas. Are the gardens well-maintained? Are the swimming pool and other communal facilities clean and in working order? These are indicators of how seriously the body corporate takes its maintenance responsibilities.
If the complex needs maintenance or is being neglected, it's very possible that at some point, a special levy will be introduced to fix issues, paint the exterior etc, which could become costly on top of the standard levies.
Security
Having security in place doesn't mean much unless it's properly managed because the better security is monitored and managed, the better the reputation of the complex or building. An unmanned security desk and lack of camera's is likely to put off many prospective buyers - and put your safety at risk.
Odendaal offers a final word of advice: "Remember, when you buy into a sectional title scheme, you're not just buying a property-you're also buying into a community that is governed and maintained by a body corporate. Make sure it's one that operates efficiently and in your best interests.
"By assessing the body corporate, you ensure that you're investing in a well-maintained, financially stable environment, safeguarding your home purchase and future peace of mind."
Author: Property24
