Sectional Title, as a form of ownership (as per the Sectional Titles Act No.95 of 1986), emerged originally to permit parties to buy a piece or section of a larger property / building / development in a fashion where there ownership (or title) is protected (under Sectional Title law) and where there are clear rules and guidelines on how the overall property is managed, maintained and run.
What happens when you buy a section is that you not only own your own unit/section but you also become a “part owner” of the rest of the complexes or buildings common (shared) property.
This form of property ownership allows that the various other parts of the buildings and land which aren’t “sections” (or tied to a section in some way – see “exclusive use” below) are designated as “common property” which in essence is owned jointly by all of the parties who hold title on the individual “sections”.
Under Sectional title law, ownership is registered at the relevant Deeds Registry Office in South Africa. Every single unit is noted and recorded in the particular developments scheme. (A unit can be a section itself, or could be the likes of a garage, a store room or staff quarters as well)Sectional title “Plans” are created and registered at the SG’s (Surveyor-General) offices on each and every Sectional Title complex or development.
These Sectional Title Plans will normally show “Exclusive Use” areas as well which designated portions of the common property are allocated for “Exclusive Use” by specified unit or section owners.
Sectional title is a common type of property ownership method whereby “sections” of buildings or a development are created within a larger scheme to allow for each “section” of the building to be individually owned.
Sectional title schemes appear most commonly in traditional residential homes in the form of flats, townhouses and apartments but have also become popular in office complexes, buildings, multi-unit warehouses and small factory units.
A body corporate in sectional title is made up of unit owners in the townhouse complex or scheme. All registered unit owners in the complex are members. The body corporate members will elect Trustees to carry out daily running of the scheme.
They can, but only by following defined guidelines as provided for in the Sectional Titles Act. The Conduct rules may need amendments over time as the complex grows and develops. To change conduct rules there will need to be a special general meeting called for (30 days’ notice is legally required to call these special general meetings) At this special general meeting members are required to adhere to the quorums as prescribed by the Sectional Titles Act to then pass any anticipated special resolution.
It is possible but it isn’t simple! You will need to have amongst other things the approval of the relevant authority at a municipal level, approval of the body corporate, have a surveyor draft a Sectional title plan of extension and have this approved by the Surveyor General, obtain consent of bondholders.
The common property is made up of those parts of portions of a sectional title complex or scheme which aren’t part and parcel of a particular “section”.
Swimming pools, driveways, passageways and entranceways would be good examples of these.
For those looking at townhouses for sale or considering buying into any sectional title scheme, they need to make sure that the schemes financial position is solid. These days banks looking to grant mortgages in complexes scrutinize these as well and they will only grant bonds in schemes and complexes which are solvent and the financials are in sound order.
Prospective purchasers of a townhouse sectional title complex are quite within their rights to ask to see the complexes latest financial statements to check that the complex is able to meet its financial obligations, surplus available and planning for maintenance matters. If you are considering making an offer on a flat, apartment or townhouse for sale, ask your estate agent if they can assist you by making a set of the financials available for perusing.
What each owner actually pays is determined by the extent of their unit when taken as a part of the whole – referred to as a participation quota or PQ. The levy is worked out by taking the annualized costs of the complex, working it back to a monthly figure and then calculating between the number of units and the participation quota what each owner pays in levies.
Monthly payments made by the body corporate members to cover the costs of running and maintaining the complex. Costs here include the likes of Municipal costs for rates and taxes, refuse removal, sewerage etc, repairs to common property, Administrative costs such as accounting or audit fees, bank costs, managing agents fees, staff costs (gardeners, cleaners when not handled by a Managing Agent) insurance, security, water and power costs for usage on common property and provisions for the likes of contingency funds.
Most townhouse complexes, flats and apartments appoint an independent company specializing in managing properties of this type (“Managing Agent”) who act on behalf of the body corporate manage much of the daily maintenance, insurance, collections of fees and levies, payments and handle the enforcement of the building, block or complexes rules and policies. Many Managing Agents in South Africa are registered with NAMASA, the National Association of Managing Agents.
The participation quota (often referred to as “PQ”) can be defined as the “share” that any particular section has in the common property in a sectional title scheme. The complexes sectional plan will include a participation quota schedule which clearly allocates a specific share to each section. This quota is used to assess and calculate what each owner’s portion of the complexes common expenditure together with the “value” of every title holders “vote”. (See section on “Voting Rights” above)
This is the number allocated to a unit as contained in a Sectional title “scheme”. It is often reflected or seen tagged with the abbreviation “SS number”.
This is a formal survey document/documentation which clearly defines the borders or boundary of all of the various sections that are held within the relevant sectional title scheme together with information pertaining to the various exclusive use areas and the resultant PQ’s (participation quotas)
When you purchase property in a sectional title scheme or complex what you buy is a “section” or even “sections”. These sections are an undivided share of the common property. It is important to understand that the section owners own and responsible for extends to the centre of outside or dividing walls, the inside of the ceiling and the top portion of the floor itself.
Trustees are in most cases owners of sections or units that have been appointed and entrusted with the day to day running of the complex and are appointed by the owners in the complex via the body corporate. This usually happens at the complexes AGM (annual general meeting)
A UNIT within a sectional scheme or townhouse complex can be defined as a section together with its allocated share in the common property.
Conduct rules in townhouse complexes or sectional title schemes tend to be aimed at governing the day to day business of the owners and tenants residing together within a complex where all have their own "private space" but where the close distances between residents’ dictates that they should adhere to certain reasonable behaviors.
When you are looking at townhouses for sale or considering buying into a townhouse complex or sectional title scheme you need to review the particular complexes rules, both the management and conduct rules.
Sectional title and townhouse complexes are governed by both management and conduct rules which are set down in writing and aren't easily changed.
These rules make provision for issues like how the body corporate or townhouse complex can appoint trustees, when and how often annual general meetings are held, the likes of matters like voting rights as well as areas and factors around effective management in a scheme or townhouse complex.
In many sectional title complexes you will find that their rules have been tweaked and have "evolved" over time. These rules are in place to look after rights of the owners and to make sure that the complex is managed correctly - in the interests of all parties and residents.
You should take the time to go through both the management rules as well as the conduct rules in a complex as very relevant issues like what the complexes provisions are around pets may be particularly relevant to your own situation when you are considering flats, apartments or townhouses for sale.
As a member of the body corporate, your votes' "value" at meetings in a townhouse complex or sectional title scheme is predetermined by what size your unit is, so in essence the larger your unit is, the larger "value" your vote has or if your unit is smaller, the lower the vote value is.
Whilst Management rules do make provision for protecting minorities you do needed to understand and accept that you can be outvoted and that unlike traditional full title property where you are 100% in control you don't enjoy the same control in a townhouse complex or sectional title scheme.
In the event of there being unusual costs – which does happen, say for example when a townhouse complex needs repainting as a whole, a body corporate can raise additional needed funds via the mechanism of a “special levy”.
As opposed to conventional full title property where you would pay rates and taxes, insurance, upkeep, electricity and water, in sectional title, many of these costs are funded from a levy fund which all owners pay into monthly.
When it comes to administering and looking after the common property within a complex, this will fall to the Body Corporate which is a collective of the section owners within the Sectional title complex.
All property owners within a complex become members of the body corporate when they take transfer of a unit in the scheme.
The complex itself is really managed by the Trustees or Board of trustees who are elected by the members of the Body Corporate (all Body Corporate members can seek election as a Trustee) Most complexes will appoint a Managing Agent (independent companies who specialise in running sectional title blocks for body corporates) to help out with the daily issues and requirements of running a sectional title complex.