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Everything you need to know about sectional title

Sectional title is described as the separate ownership of a unit within a building such as a complex or development by various people. This form of property ownership can be juxtaposed to freehold or full title, which allow owners full ownership of a property, as well as the land it's built on. Before purchasing a unit in a sectional title scheme, it's important to do as much research as possible so that you know what to expect as well as ensure that you experience all the advantages that this type of property ownership can offer you.

Here are some important points to consider before purchasing a unit in a sectional title scheme:

Sectional title units are usually more cost-effective than free-standing houses

Purchasing a sectional title unit tends to be more affordable than purchasing a free-standing property. Added to that, they can be great long-term investments. As an owner of a sectional title unit, budgeting is possible as opposed to having to deal with ongoing, ad-hoc maintenance costs that are associated with freehold properties, which can mount up and become very expensive.

Ensure that the sectional title scheme you're looking to buy in is well maintained

Before purchasing a unit in a sectional title scheme, check that the body corporate maintains the building regularly. A building that is not well maintained could indicate financial trouble, such as owners failing to pay their levies, or a body corporate that is unable to pay creditors on time, leading to the building falling into disrepair.

Ask your real estate agent to provide you with the body corporate's financial statements

Poor management of a sectional title scheme will be evident in its financial records. Ask to see the sectional title scheme's financial records and ask for assistance with reading them if you're unfamiliar with balance sheets and income statements. Added to that, should you decide to apply for a bond, your bank will require the sectional title scheme's financial records to grant you one.

Check the status of the insurance policy

Sectional title schemes are insured at replacement value and they are often underinsured. As an owner, you can choose to insure your unit at its current market value, but it's worth noting that you'll be charged for the added premium.

Ask for minutes of the AGM and trustee meetings

Be sure to ask for the latest AGM and trustee meeting minutes from the managing agent of the sectional title scheme. These minutes can provide valuable information, such as any ongoing issues in the scheme as well as special levies. Special levies can be raised if the sectional title scheme requires urgent maintenance work and there is insufficient funds in reserve.

Compare your levies to similar sectional title schemes in the area

Levies that are too high can impact your investment negatively as it may be difficult to sell the unit in the future. It helps to compare levy prices to avoid being stuck with an unfruitful investment.

Using the above points, you can make an informed decision prior to purchasing a unit in a sectional title scheme.


17 Mar 2021
Author Coastal Property Group
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