The choice of whether to purchase a sectional or freehold property is one that is highly dependent on the preferences of the prospective buyer.In simple terms, when you buy into a sectional title complex, you are purchasing either a section of the common property or multiple sections of that property. You basically own everything that is enclosed within the walls of your property, but the common areas, such as hallways, gardens and other similar features, are co-owned by the rest of the community and are maintained by all of its members. If you own a freehold property, you have the legal right to make any changes you want to your property, subject to the approval of the local municipality’s planning department. In contrast, if you owned a property with a sectional title, you would need the approval of a body corporate or homeowners association before making any changes to your property. On the other hand, owners of freehold properties are accountable for all aspects of the property’s exterior upkeep, maintenance, and repair.
Let’s break it down a bit more.
What is a sectional title when buying a house?
A residential sectional title scheme is a situation in which owners individually own “parts” of a building or set of structures. These “sections” could be townhouse units within a complex or apartment units within a block of flats. A section is an area that may be found within a room that is delimited by four walls and contains elements such as windows, doors, ceilings, and floors. The term “unit” refers to the individual real estate parcel that a sectional title owner is responsible for maintaining. A portion, also known as a flat or townhouse, and an undivided share, also referred to as a percentage, of the common property, which refers to the areas of the building that are accessible to all residents and are utilised by them.
Some of the sections that are considered to be part of the common property may also be designated as exclusive use areas. This indicates that only one owner or a group of owners may use those particular parts of the land. In addition to being obligated to pay the body corporate levy, owners have the task of maintaining and caring for their individual sections. In addition, owners are obligated to be aware of and abide by the body corporate’s rules of conduct.
What are levy costs?
All of the owners in a sectional title scheme are required to make a monthly payment known as a levy to the trustees or managing agency of the scheme (if there is a managing agent). In order to ensure that the body corporate has sufficient funds to pay for all of the anticipated expenses related to the common property of the building, levies are collected from tenants. This would include the expected expenses for maintenance of the common property, administration, the fee for the managing agent’s services, and, in situations where the water or electricity are measured by a bulk metre, the water/electricity contributions of the owners’ specific sections. Tis would include the water/electricity contributions of the owners’ specific sections.
The levy may also include a certain amount for expected future expenses. This mayThe levy can also include a set amount to account for anticipated costs in the future. This would be the situation in which the body corporate may have a significant expense in the future that would be too expensive for the owners to pay for when the expense occurs, such as the replacement of a lift. In this scenario, the body corporate would be responsible for paying for the expense.
In most circumstances, levies are not subject to modification during the course of the year, but this is not always the case. be the case where the body corporate may have a big expense in the future that would be too expensive for the
owners to pay for when the expense arises e.g. the replacement of a lift. Levies are usually set for a year, but may be changed in exceptional cases.
What is a special Levy?
In situations in which the body corporate does not have sufficient funds or is already in debt, the trustees have the authority to require that a special levy be paid by all members of the body corporate. This is another type of levy that can either be paid only once or over a specified time period.
Can the body corporate evict me if I owe levy fees?
Tenants (i.e. persons who are renting) cannot be removed from a unit by the body corporate, even if the tenants have not paid their levies or if the tenants have violated the conduct guidelines. This is due to the fact that the renters and the body corporate do not have any kind of legal relationship with one another. The owner and the body corporate do, however, have some sort of relationship with one another. The body corporate has the authority to take legal action against owners in the event that their tenants violate the behaviour rules. The owner is directly responsible for ensuring that their renters comply with the rules if they are renting from them.
What are the benefits and drawbacks of a sectional property?
Benefits of sectional title ownership
- You are responsible for a portion of the principal costs associated with the upkeep of the property, as well as the costs imposed by the local government.
- The provision of security comes with significant advantages. Because you live in such close proximity to one another and there are more people in the area, you have a heightened sense of safety. In addition to this, there are typically security facilities located at the entrance of the complexes, as well as high walls around the complexes themselves.
- You will have access to amenities, such as swimming pools and tennis courts, that you might not be able to afford if you purchased a freestanding apartment instead of a condo in a complex.
- The expenses associated with these conveniences are split among all guests.
- You do not have any responsibility for the administration or upkeep of the common spaces. These tasks are handled by a managing agent on your behalf so that you don’t have to worry about them. You merely pay a monthly.
Drawbacks of sectional title ownership
- A sectional title scheme will typically come with a variety of rules and legalities that pertain to the body corporate, your personal section, management of the complex, conduct, and common property. These rules and laws can be found in the sectional title scheme’s governing documents.
- When the rules are communicated in a way that is not clear or understandable, it can be challenging to understand what your rights and obligations are in this area.
- The rules for sectional titles are subject to change, and you have no say in the matter. You might not agree with the changes that were made, but you can’t stop them from happening because you don’t have the power to do so on your own.
- You do not have the liberty to make any external changes to your unit without first receiving clearance from the body corporate.
- t is possible that the body corporate will not have sufficient funds to meet its financial commitments if the owners do not pay their levies when they are due.
What is a freehold title when buying a house?
When you buy a house, you take on the responsibility of everything associated with it, including upkeep, protection, taxes, insurance, and payments for energy and water. Freehold ownership, also known as full title ownership, denotes that the owner has full ownership rights. These rights extend to both the physical construction of the home or building and the land that it is situated on. The term “freehold property” can refer to a number of different types of real estate, including free-standing residences, residential properties that are being used for business, small holdings, and cluster homes.
What are the benefits and drawbacks of a freehold property?
Benefits of freehold title
- The one benefit that sticks out the most for a freehold property is that the owner can make any changes they want to it without having to acquire permission, as long as it complies with the requirements of the municipality.
- You are free to paint the house in any colour you like, and you are also able to make alterations to both the interior and the exterior.
- You have the ability to design a one-of-a-kind living space that caters to the requirements of both you and your family.
- The owner is responsible for any and all maintenance on the property, including the garden, the fencing, the driveway, and anything else.
Drawbacks to freehold titles
- You will be solely responsible for all of the significant financial obligations. Because of this, it is possible that some of these prices will cause you to go over the budget that you have established for your monthly expenditures.
- If this turns out to be the case, it could require you to hunt for another house in a price range that is lower, which would mean that you would lose the chance to buy the house of your dreams.
- There might be a scenario that might involve a swimming pool or a tennis court, both of which are features of the property that won your heart over initially. If, on the other hand, the property was part of a sectional title deed, then the cost of adding a swimming pool and/or a tennis court would be divided among all of the owners of the section. If you were to do this, it would make it possible for you to buy the house of your dreams while also allowing you to stay within your financial means. However for a freehold, that cost all falls on you.
- Another downside of freehold property is that it does not guarantee the safety of your investment.
Which one is cheaper?
In general, sectional titles have the potential to be more financially feasible than freehold properties. Since annual property price inflation tends to be larger for freehold properties than for sectional titles, this indicates that a freehold is more likely to show more gain in value over the course of time than a sectional title may do.
Due to this reason, freeholds are often considered to be the better option for people who want to use real estate as a long-term investment plan. On the other hand, sectional titles are almost always the best option for anyone who wish to build a rental portfolio that will bring in a consistent flow of revenue over time. Having said that, every circumstance is unique.
References
Freehold or Sectional title ownership? | Private Property: Freehold or Sectional title ownership? | Private Property. (2022, October 24). www.privateproperty.co.za. Retrieved October 28, 2022, from https://www.privateproperty.co.za/advice/property/articles/freehold-or-sectional-title-ownership/8836
[2]“WITS sectional title i n south africa.” https://www.wits.ac.za/media/wits-university/faculties-and-schools/-engineering-and-the-built-environment/research-entities/cubes/documents/A%20Guide%20to%20Sectional%20Title%20in%20South%20Africa.pdf (accessed Oct. 28, 2022).
[3]“The Difference Between Freehold Property and Sectional Title | No Agent Private Property Marketplace,” Sep. 25, 2018. https://noagent.co.za/articles/the-difference-between-freehold-property-and-sectional-title/ (accessed Oct. 28, 2022).
