When buying a sectional title unit it’s important to do your homework so that you are adequately informed about the Body Corporate’s current finances, future projects and future financial standing.
“Buyers need to make sure they inform themselves so that they are confident with the apartment building they’re buying into and that there aren’t any surprises once transfer goes through. I would suggest potential sectional title owners check on the following five things,” says Lolly Unterslak, Property Consultant at Jawitz Properties Atlantic Seaboard.
1. Body Corporate Financial Statements
The first step is to ask your real estate agent for the Body Corporate’s financial statements and study them carefully. Ascertain whether the Body Corporate is solvent, and look for any large or unusual expenses that could indicate a problem. If you don’t know how to read a balance sheet, find someone who does. Furthermore, if you’re applying for a bond, your bank will request to see the financials.
2. Body Corporate Minutes
Ask for the minutes of the latest AGM and trustees meetings. These will tell you whether any special levies for extraordinary expenses are in the offing. “You might find, for example, that the Body Corporate is planning a major maintenance project but doesn’t have sufficient reserves to fund it.” The minutes will indicate whether the Body Corporate plans to raise a special levy for a major maintenance project or raise the levies in general in the near future.
3. Benchmark your Monthly Levy
Comparing the levies with those of similar complexes is also useful. “Levies that are unusually high affect the price of units and could therefore have a negative impact on your investment when you eventually try to sell.”
4. Understand the difference between ‘common’ and ‘exclusive use’ areas
Within the Body Corporate property as a whole, there are areas zoned as ‘common’ property and those that are ‘exclusive use’ areas. It is important to know and understand the difference. Common property refers to any part of the property that is shared by all owners, such as gardens, driveways, pools and clubhouses, etc.
Whereas ‘exclusive use’ areas are portions of the common property that a specific owner has an exclusive right to use, but which is not owned by that owner. This may include carports, parking bays, or exclusive use garden areas.
5. Become Au Fait with the House Rules
An important piece of the information puzzle is the House Rules. Most Body Corporates have a set of house rules that cover a wide range of issues governing communal living. These cover a range of issues ranging from whether you’re allowed to keep pets, rent out your apartment for short-term letting to having loud parties beyond a certain hour. “The house rules give you an indication as to the type of owners and their values, and gives you, as a potential owner, an opportunity to decide whether you’ll be comfortable living there or not,” Lolly concludes.