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Sectional title is communal living . . . you won’t always get your way

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When buying into a sectional title scheme it is important to remember that while you are buying ownership of your flat or townhouse, you are also automatically becoming a member of the body corporate.

The body corporate is essentially all the owners acting together.

At an annual general meeting (AGM), the owners will elect trustees who represent the body corporate and these people are the scheme’s connection to the real world.

While in practice the managing agents will handle much of the day-to-day affairs of the body corporate – paying accounts, buying cleaning materials, handling the sending out of accounts and collection of levies and service fees – this is done under the eye of the trustees.

The trustees can manage the decisions that need to be made between general meetings.

They can, for instance, approve repair work that needs to be done, approve dismissal and hiring of cleaners, approve minor quotations and the like.

They run, through the managing agents, the day-to-day work of your schemes.

For major decisions, they should always refer to all the owners – after all, everyone is an owner of a part of the whole common property and any decisions, other than normal day-to-day decisions, should be made by everyone. 

When calling an AGM or special general meeting (any general meeting other than the AGM), trustees must give proper notice of the meeting and add items that need to be discussed and decided on by all owners.

The agenda should have full disclosure about what is to be discussed and should include any information that is relevant.

So, if the trustees think that it is a good idea to build additional parking bays, then they should motivate for it with reasons why they think it would be a good idea and include how much it is going to cost and how it is going to be funded – does the body corporate already have the money to do the work or will there be need for a special levy?

They should also set out the benefits – for example, will rent be charged for the parking bays and will this cover the cost in the medium or long run?

Each decision should be voted on by the owners.

While the Sectional Titles Act says that voting is done on a participation quota (PQ) basis, in most cases it is for practical reasons done by a show of hands.

The majority decides which way the vote goes.

In reality, there is often a consensus (when just about everyone agrees) but occasionally one or two owners will not agree.

The majority has the say – you may not like it, but you have to live with the decision.

One word of caution though is that decisions have to be logical.

For example, you cannot decide to raise a special levy based on an equal basis – it must be done on a PQ basis.

You cannot, for example, decide not to include an owner living on the ground floor from paying his/her share of a special levy to repair the lift.

If you are really unhappy with a decision made by your body corporate and feel that the decision is unfair or prejudices a particular owner then you can make a complaint to the Community Schemes Ombud Service tribunal which will look at the merits of your complaint.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

Avoid the rent trap

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Owning your own home is very important.

Even though it may seem not so key to some people for now, when you retire you will realise the importance.

Those that plan well should, by the time they retire, have bought their own home and paid it off.

Can you imagine the stress of retiring and having to continue paying rent at the risk – no certainty – of annual rent increases.

It must be hell.

When you are paying rent, you are simply allowing somebody else to pay off an investment property.

By the time they retire, not only will they own an unbonded home of their own but they will own one or more unbonded properties that they let out for an income.

That is the position that you would like to be in.

Buying is more expensive than renting, for now.

To buy you need to pay the levy, rates and taxes and maintain the property instead of just paying rent.

The price of the property is fixed and the bond should be paid off over 20 years – you should pay more to reduce that time.

At the end of that time, your bond falls away and you only pay rent and levy.

Yes, bond rates, and thus your bond payment, can change over time.

We are likely to see a one percent increase in rates over the whole year but on an amount of R500 000, the extra is just R316 per month.

If you have followed my earlier advice, you will already have paid off lots off your bond.

The increase would only be based on the balance owing.

The reality is that your rental is likely to have been R5 000 per month on that place anyway and that with increased inflation the increase could well be 10 percent anyway – i.e. R500 per month and that will happen every year whereas for the owner interest rates that go up are just as likely to go down!

There is no doubt that the person that retires with a fully owned property is sitting in the pound seats.

If nothing else in our example they would have R5 000 a month tax-free extra money to spend compared to “Mr Rental”.

Does it make sense to you to own your own property now?

Should you need advice about buying or selling property, you may contact me via phone number 082 881 4711 or email address mike@platinumglobal.co.za

  •  Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

You buy what you see

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Buyers are not always experienced and should therefore rely on their estate agent to guide them through the process.

It is however important that the buyer understands that they are buying what they see.

A previously owned house, like a second-hand car, will seldom be perfect and will have a few years of use, wear and tear on its clock.

Buyers must understand that they are buying a second-hand house and not a new one.

New houses come with an expectation that the builder is responsible for the first three months after moving in for minor repairs like loose tiles, cupboard handles and sticking sliding door.

For the first year they are responsible for roof leaks and for five years for major problems such as cracking foundations and badly designed or constructed roof structure.

This is not the case for resale houses.

The seller’s obligation is to tell the buyer about any serious faults that the buyer may not see easily.

They do not have to point out, for instance, that you have to wiggle the toilet handle to make it work, but would have to let you know about dampness on the wall behind the bookshelf or the garage door motor that sticks if it rains.

Other than that, it is up to the buyer to look at the property that he is buying and decide that he is happy to buy it with the minor faults that come with any property that you buy.

If there is something that you think needs to be fixed, that’s fine.

Just add it as a special condition in your offer.

An example might be “subject to the seller replacing the cracked window pane on the lounge window”.

The seller can then decide to accept the offer with this condition or not and if he/she does then they must arrange for the window pane to be replaced, the frame around the pane to be repainted, etc.

This would be done at his cost and not the buyer’s.

You cannot expect the seller to fix problems that appear when you move in.

It is not the seller’s responsibility to fix toilets that are not flushing, taps that are dripping, doors that leak when it rains hard from a particular direction or the like.

Everyone who moves into a property expects to spend the day doing small repairs and washing walls.

So, take time to look carefully at the property you want to make an offer on.

Either put in those items that you want the seller to fix into the contract as a special condition or adjust your price down a bit to allow you to do those repairs yourself.

The seller is not obliged to accept your special conditions and could reject them or adjust the price upwards to cover the cost of these repairs.

The more complicated you make your offer the less likely you are to have your offer accepted or for the seller to accept a competitive offer.

Often it is easier just to arrange to do those odd jobs yourself.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

Are student houses a good investment or not?

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I have touched on this topic before but I feel I should revisit it.

From the outset I must state that I have never advised anyone to buy a house as a student res.

Why not?

Well, the norm is to buy a pretty decent family home and convert it into a student hostel by adding rooms in the lounge, dining room, maid’s room and garages.

Essentially killing its appeal as a normal family home.

Recently, student house owners have had to register with the varsities to enable students with bursaries to stay with them.

Not only do the rooms now have to comply with size and fitting requirements, but the houses have to be zoned/registered with the municipality.

The reason being that these houses are zoned as single-family units and not as boarding houses or blocks of apartments, which is essentially what they have become.

These owners also have to provide a full set of approved building plans.

This can be a daunting and expensive task as municipal plans departments have lost most of the original approved plans.

As a result, most of the alterations that these student house owners have done were done illegally without building department approval.

A large number of these student homes are coming on to the market for resale at prices that the owners think that they should get in order to cover the cost of buying, plus the alterations that they have done and based on the perceived income that they would get from letting rooms out to students.

But here comes the nub.

The unapproved alterations are just that: unapproved.

Whoever owns the property will at some point need to have to tell the municipality about the changes and pay for proper plans to be drawn up and approved.

There is also a strong possibility that where these changes don’t comply the owner will need to have them demolished.

Don’t think that it won’t happen – there is a very strong chance that it will.

On top of that, what was a neat family home when it was bought has possibly been occupied by young students for five years or more.

Students are not known for being the most house proud of people and are usually very hard on any property that they occupy.

Bathrooms are likely to be in rather poor shape as is the kitchen.

Carpets are likely to be worn and dirty.

Fittings tired and chipped.

In other words, the value of the property is likely to be very much less that a normal family occupied house.

Investors in student homes are finding out that it is far from the massive income and investment that it is often calculated to be when buying a student home.

Firstly, students don’t occupy student accommodation for 12 months per year.

They are actually only at varsity from February to November each year, so don’t want to pay for those three months when they are not there.

Students don’t normally have much in the way of funding, so there is a great potential for them to disappear when funds run out.

Typically, in July a substantial percentage of students stop being students for a variety of reasons.

Course failure is a big one but running out of funds is also very common.

Assuming you have a 10-room student house, this could mean no income for 25 percent of the time and 20 percent of the students not renting beyond July each year.

When students disappear in July that means no income on that room from July until the end of January (seven months!).

Many student house owners underestimate the cost of running their student houses.

Rates are likely to be raised far higher than a normal house, after all you are now running a business from those premises and if your zoning is not right you can be charged penalty rates too.

Students won’t look after the house for you – they will just use and abuse it.

Who is going to clean the inside and who is going to keep the garden in good order?

Just taking out the rubbish will require somebody to come and do it – the students won’t.

Students need supervision, which is fine in a 200-student accommodation property but very difficult for an individual student house.

Students are party animals and can be very noisy which frequently disturbs neighbours. 

Neighbours are quite likely to take you to court for noise, dirt, unkempt gardens and much more.

While you can hear I don’t think that student homes are a good idea, hopefully this article will give you a chance to think twice before buying a house for student housing.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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