For owners of sectional title property investments it’s important to understand how levies are calculated and apportioned according to their participation quota (PQ).
Some may argue that there are certain areas that are included in their PQ that do not use services. If there is no service charge, why should they pay?
For example, what happens with garages? These do not have water and sanitation. Similarly exclusive use areas such as enclosed balconies, store rooms parking bays as well as private gardens would add to the PQ and the resulting levy charge each month. Then there is the issue of ground floor flats, which do not use the lifts, being included in the special levy allocation for lift repairs or maintenance.
Owners may feel it is unfair that these areas are included their PQ but the Sectional Titles Act clause 32(1) states that: “Subject to the provisions of section 48, in the case of a scheme for residential purposes only as defined in any applicable operative town planning scheme, statutory plan or conditions subject to which a development was approved in terms of any law, the participation quota of a section shall be a percentage expressed to four decimal places, and arrived at by dividing the floor area, correct to the nearest square metre, of the section by the floor area, correct to the nearest square metre, of all the sections in the building or buildings comprised in the scheme.”
For example, let’s say the sectional title scheme’s levies amount to R500 000 per annum, at a PQ of 5 percent, your levy would come to R2 083 per month. Calculate 5 percent of the total levies and divide this by twelve to arrive at the monthly levy payment.
When formulating your strategy on how to build a property investment portfolio, it’s essential to consider these factors in selecting good property investments. Before you sign an offer to purchase, understand what your PQ would be and how this is calculated.
IGrow Wealth Investments can guide investors through the process of finding and purchasing the right distressed properties and below market value properties. Understanding what you are buying and minimising your risk, will see you well on your way to building a high-performing property investment portfolio.
The Sectional Titles Act lays out how shared costs should be divided in the fairest and best possible way, enabling a scheme to run efficiently. If owners could change things to suit their own interests, disastrous consequences would surely ensue.
Those buying sectional title investment properties, should understand this from the outset. That way there’ll be no nasty surprises!