Sectional title and cluster developments may look similar but they are very different in terms of ownership. Here’s what you need to know.
The Sectional Titles Act came into law in 1986 which provided for an improved form of title for apartments. Sectional title ownership means that you own your unit (or section) and that you have ownership of an undivided share of the land and common property of the complex. Prior to this, units were owned in a ‘shareblock’.
“There tends to be confusion over the difference between sectional title and clusters,” says Ynnis Willson, Jawitz Properties’ Randburg branch manager. The development types might look similar, but in essence they are very different in terms of ownership. Before buying, the buyer should be aware of what constitutes both,” she says.
Townhouse developments are sold under sectional title which means that the owner has legal title to improvements of the ‘section’. In laymen terms you only own that part of the building that you occupy and not the surrounding land. This includes the walls, floor and ceiling, as shown on the registered Sectional Plan. The land and those parts of the buildings that are not sections are referred to as the ‘common property’. All staircases, external passages, roof, swimming pool and land on which the building is built fall under this classification and are jointly owned by the unit owners. Neither the unit nor the common property can be separately owned.
The ‘Body Corporate’ (BC) is a legal entity responsible for the management and administration of the complex. Owners automatically become members of the body corporate.
The ‘trustees’ are elected by members of the BC who meet on a regular basis and are responsible for the day-to-day running of the development scheme. They need not necessarily be owners in the complex.
The ‘levy’ is a monthly contribution payable by every home owner in the scheme and is calculated on the quota share of ownership. The levy includes (but not limited to) common area rates and taxes; general maintenance and water and electricity of the common area; insurance, wages for caretakers, management and audit fees, lift, maintenance and garden services. Remember that individual rates and taxes plus water and electricity for the unit is paid separately. The budget is set and agreed by the BC and adjusted annually at the Annual General Meeting.
Prescribed management and conduct rules are set down in terms of the Sectional Title Act at the outset of the scheme and can only be charged by unanimous resolution of all owners. Any changes in the management rules need to be registered in the Deeds Office to be enforceable.
The Board of Trustees is entrusted with the day-to-day management of the complex to promote harmonious relations between the owners and to ensure the complex is well run.
Before transfer can be effected a ‘Levy Clearance Certificate’ is obtained from the Body Corporate (or managing agents acting on their behalf) certifying that all levies have been paid in full. The certificate is valid for a period beyond the date of the transfer, and the appropriate amount is paid by the purchaser through the transfer attorney and credited in the Body Corporate’s book of account. All adjustments are done on transfer.
Unlike sectional title, you own both the land and the improvements to your portion in a cluster development
All portions within the cluster development are held by freehold title and costs associated are for the owner’s account.
A Home Owners’ Association takes care of the common area within the development such as the roads, entrance gate, park areas etc. Similarly, a levy is collected to account for the cost and is payable by all home owners in the development.
A Section 21 Company (a company incorporated not for gain) is registered to take transfer of the internal roads and to maintain the internal services within the development.
Owners are automatically members of the Company and are required to pay the monthly levy.
A budget is set by the members of the Home Owners’ Association and a Board of Directors is appointed to facilitate the daily running of the development.
Rules of the Home Owners’ Association are established with the formation of the Section 21 Company and incorporate guidelines should any changes be necessary.
When the property is sold, the Section 21 Company furnishes a clearance certificate stating that all levies are paid up-to-date.