If you are thinking of buying into an apartment building or other sectional title (ST) complex, it’s vital that you read and understand the conduct rules of that particular complex before you sign any offer to purchase.
“These rules are not standard for every complex,” says Gerhard Kotzé, MD of the RealNet estate agency group. “In terms of the Sectional Title Schemes Management Act (STSMA), the owners in a complex are able to change conduct rules or make new ones that, subject to approval by the Community Housing Schemes Ombud, will apply only to their complex.
“It is well known that some complexes do not permit pets, for instance, but owners are also able to make complex-specific rules about the use of communal amenities, such as swimming pools and carwash bays, for example. Or about where and when residents may hang washing, dispose of refuse and allow construction work to take place, even inside their own sections.”
It is important for ST buyers to realise, he says, that they will not just be moving into a new home, but also immediately become part of an established community which has over time come up with its own a specific ‘code of conduct’ to help its members get along - and where they are likely to feel very uncomfortable if the rules clash with their own needs or lifestyle.
“This is why any agent will give you a copy of the Conduct Rules when you attend a show day or view a unit for sale in a ST complex - along with copies of the most important documents relating to the financial well-being of the complex as a whole, such as the most recent audited financial statements and the approved budget for the current year,” states Kotzé.
As a prospective buyer, Kotzé says it is also vital that you are certain what your levy commitment would be as an owner in a particular complex. “This is usually determined by the participation quota (PQ) schedule, which shows how big each section in the complex is in relation to the whole, and thus what percentage of the common expenses each owner should pay each month.
“These joint expenses include insurance premiums, maintenance costs, wages and salaries, gardening, cleaning and security costs, as well as the charges for any water and electricity consumed on the common property, and the PQ system generally ensures a fair apportionment, with the owners of bigger sections that consume more of the common resources paying higher levies.”
However, he notes buyers should be aware that the levies in a specific complex may be calculated differently if the owners have passed a special resolution to that effect and had it approved by the Ombud, or if the original developer of the complex assigned values to each section that differed from the actual PQs.
“In addition, garages or storerooms that are registered as separate sections will mean additional levy payments, so you need to check on that as well,” says Kotzé.
“And lastly, you must find out how big the complex’s reserve fund is. The STSMA provides that every ST scheme must have a reserve fund equal to at least 25% of the scheme’s total annual levy budget, and that if it does not, the owners in the scheme must add 15% to their total levy budget each year until it reaches this minimum, and preferably a higher level. Your share of a required reserve fund contribution could thus make quite a difference to your monthly budget.”
original article here