An Overview of the Types of Residential Properties - Part One

This is the first in a two part series on different types of residential properties. You can view part two here

Residential Freehold Properties, incl. Boomed-Off Areas.

Examples of residential freehold properties are vacant stands, a regular stand with a house (these could also be situated in estates or complexes), farms, plots, smallholdings, and so on. There are two main types of freeholds; residential freehold properties, and clusters or properties in an estate.

When you own a residential freehold property, you (or you and your co-owners) are the sole owner of the property. You have full rights over the property, no governing body to answer to (except for the local authority), no rules regulating your conduct and no levies to pay. You own the land and all its permanent structures. You are responsible to maintain it and for the rates and taxes payable to the local authority.

Boomed-off areas or road closures have become a very hot topic for debate over the past couple of years. There are those who oppose the concept, stating that it is a money making scheme, that denies the general public access to public roads which belong to everyone. The rationale behind this is that certain communities prefer to 'create an estate cheaply' rather than going through the expense of buying into an established or purpose-built secure estate.

The fact is however, that crime is a problem in South Africa. Residents are trying to keep their homes and families safe, and taking crime prevention into their own hands.

Road closures increase security in a community, not because they keep people out, but because structures are put into place to make it difficult for criminals to escape and more possible for the community and security companies assigned to alert police to known criminals.

Only once proper procedures have been followed and permission granted by the relevant authorities can an area be closed off legally. All residents involved are required to pay a monthly levy and occasionally an additional "special levy" to pay for "out of the ordinary" expenses, like shortfalls created due to certain residents not paying their levies or installing extra security measures and so on.

Road closures are a worldwide phenomenon, effective in protecting residents against crime. Other countries like Germany, Ireland, France, and America have very similar, and in some cases identical residential security infrastructures and programs.

Clusters and Estate Living

Security forms an essential part of community living. 24-hour guard patrols, single entry access, state of the art security surveillance, carefree living, maximum privacy, peace and quiet, very little traffic and a clean environment are a few of the other advantages.

Clusters and properties in secure estates are also freehold residential properties and although you are the sole owner of the property and have "full rights" over the property, these rights are subject to the Home Owners' Association's (HOA) or Management Committee's rules and regulations. All the owners within the development form part of the HOA and there is a committee appointed, usually at an annual general meeting of all the owners, to carry out the day to day running and management of the HOA.

You own the land and all its permanent structures, although you may have restrictions regarding the exterior appearance of your home or the nature of the improvements you are allowed to make to your property. These rules and restrictions may include amongst others, uniform standards for exterior light fittings or security bars/gates, or prohibition against adding on carports, tool sheds and so on. They may even include what kind of vegetation you plant in your garden or on what side, i.e. north or east, your entertainment area may be. These rules and regulations are generally put in place to protect all the residents' rights of privacy or to keep up a certain standard within the development.

It is advisable to read through the HOA rules before signing an offer to purchase, so as to avoid actually signing away some of the basic rights as property owner which may be too restrictive for your liking. In most instances an agreement to abide by the HOA constitution and rules is a condition of purchase.

Prospective buyers may find a provision that they may not sell a stand or a home in an estate within a certain period of time after taking transfer or that they need to obtain permission from the HOA to sell. These rules are obviously to protect the developer who still has properties to sell in the estate. If the developer still holds the majority of the stands available in the estate, it will be difficult to amend these rules because the developer, as the owner of the unsold properties, still commands many HOA votes.

Prospective buyers should feel free to challenge such extraordinary restrictions. However you need to know about them in order to challenge them.

Sometimes HOA may impose fines on you if you do not comply with the management committee's rules and regulations, and the management committee may hold regular inspections and take firm action against non-complying owners.

You are responsible to maintain the property and for the rates and taxes payable to the local authority. You will also be liable to pay levies for maintenance and insurance, the upkeep of common areas, security systems and staff, management fees and so on. Also keep in mind that HOA budgets tend to be lean and the failure by one or more owners to pay their levies place an unfair financial burden on the remaining homeowners. And although HOA constitutions usually provide for the association to take legal action against defaulters to obtain a judgement, this process can be both time consuming and expensive - placing a further strain on the HOA budget.

In return for all the rules and regulations you enjoy the benefits of additional security, harmonious common areas, protection of the value and even rises in the value of your property.

In Part Two, we look at Sectional Title schemes, Time-Sharing and Retirement Developments.

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