Types of Properties

• Sectional Title Ownership
• Cluster Development 
• Buying a Unit Directly From a Developer

Sectional Title Ownership

Sectional title is a system in which 'sections' of buildings are individually owned. A 'sectional plan' is registered for each development scheme. It shows the sections - which are individually owned - and the 'common property', which is the land and all parts of buildings that are not part of any section. The common property is owned jointly by all the people who own sections. Some parts of the common property may be set aside for 'exclusive use' by particular owners.

If you decide to purchase an apartment or townhouse, you should note that most of these are sold under sectional title ownership. You will buy more than just your own living space and any exclusive use of an area - you also become a part owner of the common property and a member of what is termed the Body Corporate or Association.

You are therefore buying into 'communal ownership' where you will have to abide by the decisions made by the majority of unitholders or Body Corporate.

Every scheme has a Body Corporate. This is an association - not a company or partnership - with the ability to contract, to sue and be sued and all the owners of units are members. It exists to administer the scheme and manage the common property. The Body Corporate takes decisions at two levels; at meetings of owners and at meetings of trustees.

A monthly levy to meet the rates, taxes, maintenance, insurance and other operating and maintenance costs of the complex is payable. This levy is usually a fixed cost, which can be increased from time to time (as determined by the Body Corporate) - usually on an annual basis.

It is wise to establish the following:

• The financial position of the Body Corporate. (This is done to assure yourself that the Body Corporate will be able to meet any financial obligations that might arise and not institute any special levy in order to meet them.) Note: The bank has the right to request proof that rates and taxes are paid up to date.
• The current amount of the monthly levy.  In some instances, depending on the individual development, these levies can be quite high.  Ask how it is made up and when it was last increased.
• Sometimes a special levy is required to meet future costs should the building be old, or need special repairs or improvements. Ask the Chairman of the Body Corporate whether a special levy is likely to be required in the near future, and if so, how much and for how long? Also ask if such a levy was called for in the past, how much it was and what was it used for.

In summary, check the following when buying sectional title property:

• Look at the sectional plan to determine your section boundaries, the scheme boundaries and that any section you are buying has not been informally 'extended' or altered.
• Establish who owns or has exclusive use rights to parking, garden, storage areas, etc. Make sure that you are obtaining rights to any area you expect to be able to use exclusively, such as a parking bay or garden area and whether they will be recorded at the Deeds Registry or in terms of the scheme rules.
• Check the participation quota of the sections. This usually determines your share of the Body Corporate expenses which you pay monthly in the form of a levy and the value of your vote.
• Get a copy of the scheme rules - read these and look particularly for any rules that change your liability for levies or create exclusive use rights.
• Check the current monthly levies and what expenses are included in the most recent operating budget.
• Inspect the condition of all the scheme's common property, to assess the likelihood of any significant expenses for repairs and maintenance in the near future.
• Read the most recent set of financial statements - look particularly to see if there are sufficient reserves for maintenance and unexpected expenses.
• Find out whether the Body Corporate owes money to a levy financier, the local authority or a supplier, and if it is involved in litigation or has judgments against it.
• Check the amount and type of insurance cover and the current insurance replacement value allocated to the section.

Cluster Development

Cluster homes operate along similar principles as townhouses, but there is a distinct boundary to the property.

• You have own title to your unit and its garden, but shared responsibility of the common property.
• There is no Body Corporate. (This means that you own the property and are personally responsible for rates and taxes, insurance, maintenance, etc.)
• Most cluster developments form a Homeowner's Association to look after general administrative and operational issues of the development - like maintenance of roads, security, etc.

The administrative and operational costs will normally be distributed among the owners. A levy will therefore be payable by each owner for costs/expenses, e.g. replacement of streetlights, maintaining of gardens, etc.

Buying a unit directly from a developer

The concept behind buying directly from a developer is to purchase a unit 'off-plan', thus avoiding having to pay transfer duty, as the developer has to pay VAT.

Off-plan means that your unit has yet to be constructed. On completion you may then take occupation of the property.

The developer will require a deposit to secure your unit. When buying off-plan you must be aware of what is included and what is excluded. It is your responsibility to ensure that final payment is not made to the seller/developer prior to occupation taking place, as you could be liable for interest and repayment of the bond.

Ensure that you view the development plan and enquire about the time scale and number of planned future phases in a very large complex.

You may be able to change aspects of the interior decorating when buying off-plan. This means that some finishes may be changed to suit your individual needs, but this may mean an increase in the unit price.

Ensure that you are dealing with a reputable developer who has a well-known and proven track record (investigate the developer's credentials before making a commitment to purchase a unit). The developer is the owner of the land and will be responsible for having opened a sectional title register. Simply put, this allows him to sell portions of the property which means you buy the title to a specified unit (not the land).