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Property buyers that are purchasing sectional title property should not only evaluate all aspects of the property but it is equally crucial to review 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,” Cobus Odendaal, CEO, Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg said.
Therefore neglecting to evaluate the overall management, financial health and effectiveness of the body corporate can lead to challenges in the long run.
Odendaal shares the following factors that property buyers should check when assessing a body corporate:
Odendaal said that before purchasing a sectional title potential, buyers need ask to see the latest financial statements of the body corporate. The financial statements should offer a clear picture of the financial health of the complex.
Key things to look for include:
– A healthy reserve fund set aside for future maintenance and repairs. A well-funded reserve is an indication that the body corporate is planning for long-term upkeep, lowering the risk of special levies.
– Debt levels: If a large number of owners are in arrears on their levies, this could be a sign of financial instability within the complex, and you might end up paying more to cover shortfalls.
It is crucial that you understand how much the monthly levies are and what exactly they cover. These levies usually 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,” Odendaal said.
“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.”
The minutes of the Annual General Meeting (AGM) offer buyers valuable insights in the management style of the body corporate, any ongoing disputes as well as upcoming projects.
Any major unresolved issues or a history of conflict between owners and the body corporate, could be signs of trouble.
You should also look for any mention of planned special levies or major repairs which could have an impact on future expenses.
Every sectional title complex has conduct rules that owners and residents must follow. The conduct rules can cover a wide range of issues including 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,” Odendaal said.
Take a walk around the complex to assess the overall condition of the common areas as well as see if they are well-maintained and in working order.
Odendaal said that if the complex needs maintenance or is being neglected, it is possible that a special levy will be introduced to fix issues which could become costly on top of the standard levies.
“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,” Odendaal said.
IOL Property