Sectional Title – uncovered!
So why is this popular option? Well, there are many reasons, and among them the need for secure living in close proximity to other like-minded people as well as the need to ‘spread the load’ with regards to upkeep and running expenses.
But this is simplifying what can be a much more complex investment than a freehold property. Sectional title properties are as good an investment as other property investments but, as in all investments, you need to make decisions when you are in possession of all the facts and have weighed up what is best for you and your circumstances.
Remember that what is best for you is not necessarily best for someone else – however you could both end up with superior investment results and have achieved them just by having gone on different routes.
Before examining some of the complexities with regard to sectional title, I’d like to have a look at some ‘pros and cons’ – here are some ‘pros’ –
- Many home owners look for added home-security and it is perceived that sectional title properties provide this more effectively than a freehold one. And with more complexes adding access restrictions, high walls and electrified fencing these types of complexes tend to be in demand so are sought after by residents and investors alike.
- The sectional title owner is able to share the responsibility of maintaining and managing the communal areas as all the owners contribute towards this cost by means of levies. The managing agent, appointed by the Body Corporate is responsible in ensuring that the property is preserved to the standard the owners require.
- While residents can maintain their privacy, when they need to, the communal aspect of the complex allows greater interaction with other residents and this has also become a desirable plus of sectional title living.
- Amenities that might otherwise be unattainable in a freehold situation can become attractions in a sectional title complex – like swimming pools or tennis courts – with their maintenance and costs shared via the Body Corporate and included in the monthly levies.
- Naturally, the value of any property is affected by the area and the position it enjoys, however sectional title offers like-for-like type of accommodation at a cheaper price than its freehold comparison. For example, a sectional title unit in a middle class area may sell for around R800 000 while its freehold equivalent in the same area will be sold for R1.5m.As with the many ‘pros’ there are also the ‘cons’ that need to be taken into consideration –
- Complex legalities can pose difficulty in understanding the implications of sectional title investments. Issues such as quorums, participation quotas, nominated values, exclusive use area and other issues need to be mastered by the successful investor and owner in sectional title projects.
- Every owner is a member of the Body Corporate, but sometimes they battle to understand their individual duties and responsibilities including the rules of conduct to which they are subject. It is vital that owners master and embrace this Body Corporate structure together with all the nuances it brings in order to successfully benefit from the sectional title investment.
- The other thing that sectional title owners have no control over is the rules that may change from time to time as a result of legislation or majority votes in the Body Corporate proceedings. Individual tenants or investors may not always be in agreement with changes that are made and this can be a cause of frustration and tension. Naturally this does not occur in a freehold property.
- For those investors who hold interests in a number of sectional title properties, the frequency of meetings and staying involved in each property can be difficult and labour intensive, especially as they want to maintain the right interest and involvement in each investment. Decisions that need to be made may not always be implemented with the same speed or decisiveness as if they were investing in a freehold property.
- For those in residence in sectional title property a negative is that the more open lifestyle that comes with it may not be to everyone’s taste. In a freehold property the neighbours are usually not in as close proximity but even more than that, in a freehold property the neighbours do not have a say in decisions that can affect your unit – but they can and do in sectional title projects.
- Any changes, alterations or improvements you might wish to make to your unit under sectional title may be a complicated and drawn out affair. Permission from the other members of the Body Corporate is necessary and if there is no agreement further delays or disappointments could occur.
There are many advantages to investing in property through sectional title and this time I have merely outlined a brief list of ‘pros and cons’ to get the ball rolling. In future articles I will examine other aspects of this exciting investment – but with so many options available, when you are investing your own capital and making financial decisions as you use property investments or other vehicles to grow and protect your wealth you need the very best advice.
Before making any final decision on how your money needs to be employed, look to independent specialists who have the right team of professionals for advice and guidance. Work with the team that has the track record of success, integrity and security that you want.
Contact us at IGrow Wealth Investments – our team and I will help you on the road to achieving the success you deserve.