Sectional title bodies corporate explained: What it is and what it does

21 September 2015

Know what you’re buying into, says property manager.

What many people do not realise when signing an offer to purchase a sectional title unit is that in doing so they are agreeing to the conditions of buying into that scheme and they become members of a group, the body corporate, who are responsible for the day to day running and financial management of the scheme, says Shan Hulbert, sales manager at Knight Frank Residential SA.

The body corporate is the collective name given to the owners of the units and common property within a sectional title scheme and this comes into being when the developer transfers the first unit to its new owner. The developer, in fact, needs to call a meeting within 60 days of the body corporate being formed and at this inaugural meeting, according to the Prescribed Management Rules, will hand over the sectional plan and a certificate from the local authority indicating that all the rates due by him have been paid. In addition, the body corporate should receive paperwork pertaining to the income and expenditure regarding management of the scheme and any money received in, in time between the first handover of a unit and the formation of the body corporate, said Hulbert.

The body corporate’s function is to manage and maintain the property, which includes the common property (the driveways, common green spaces, swimming pool clubhouse, etc.) and exclusive use areas. To do this they will appoint trustees to act on their behalf and the trustees’ duties will include: 

     establishing a fund via levies paid by the owners for maintenance, management and administration of the common property and payment of taxes, water, electricity, insurance and other necessary services;

     opening a bank account;

     insuring the buildings;

     maintaining the common property;

     arranging repair of any damage caused once insurance has paid out or has been covered by whoever responsible;

     informing the Registrar of Deeds and local authorities what the official address of the body corporate will be; and

     maintaining all the instruments and machines that form part of the common property.

Initially, the key role-players in a sectional title scheme would be the developer, body corporate, trustees and management agents. The developer forms the company who has built the scheme and he/the company will cease to be a member once he/she no longer has a share in the common property. What some developers do is hold onto the ownership of some of the land and retain the right to develop at a later stage – which is what buyers should watch out for, says Hulbert. If this is the case, buyers should ask questions as to what the developer intends to build there and whether there is a limit as to how long he can take to develop the land and height restrictions etc.

Sectional title schemes have many benefits in that expenses are shared between the owners, which allows residents many “extras” that they might not be able to afford if living in a freestanding home, said Hulbert. Many schemes have full security, and often have amenities such as swimming pools, gyms, tennis courts, laundromats, clubhouses, and large green communal gardens, all of which cost extra to maintain.

This is why sectional title property has become so popular, the convenience and the communal living, which often offers a higher standard of living at a lower cost. Owners, however, just need to be aware of what their responsibilities are when deciding to buy into a scheme, she said.