Sectional title vs freehold: the pros and cons
Think carefully before you buy – your property should fit your personality and pocket
FOR most people, buying property is likely to be the biggest purchase of their life. Sectionaltitle units are becoming increasingly popular because they’re more affordable and many people feel it’s safer to have close neighbours, while others prefer the independence of having a full-title property.
Before buying property, carefully consider what the best option would be for you.
KNOW THE DIFFERENCE
If you buy a full-title property, you take ownership of the land and everything on it. It’s yours to do with as you please, provided you don’t break any laws.
With a sectional-title unit you take ownership of a unit such as a flat or townhouse in a development and share communal areas such as a swimming pool or garden. Although you’ve paid for your unit, you can’t do with it as you please – you have to adhere to the regulations set out by the body corporate, which is responsible for the management and finances of the complex. The body corporate also ensures that rules are adhered to, such as what the outside of buildings should look like and where guests are allowed to park.
Sectional titles are generally more affordable than full titles. The average price of a sectional-title home is R976 442 and that of a full title is R1 185 381, according to FNB’s Property Barometer. The price depends on your choice of neighbourhood, the type of complex and the size of the property.
Before buying a property, consider whether the value is likely to appreciate. Generally, the prices of sectional-title units increase faster than those of full-title properties – but that doesn’t mean your sectional title will sell faster. The resale value of your property depends on other factors, such as location.
The bestsellers in sectional titles are units with two or fewer bedrooms. Research among estate agents shows this is the key market for first-time buyers and this segment performs well regardless of the economy. According to the Property Barometer it’s been the top performer for the past 16 years when it comes to house price growth.
The full-title properties with the highest average price increases are those with three bedrooms.
Many people feel safer in a complex where they’re surrounded by neighbours. Also, many complexes have security guards, controlled access and electric fencing. The cost of this is usually included in the levies.
With a full-title property your personal safety is your responsibility and you have to pay for things such as an alarm system that’s linked to a security company.
Costs such as utilities and rates apply to both sectionaland full-title properties. A sectional title also includes a monthly levy to cover costs such as the upkeep of the buildings and communal areas in a complex, salaries of complex workers and security, says Shaun Rademeyer of BetterBond. The more services and amenities a complex has, the higher the levy.
Before buying, ask what’s covered by the levy, by what percentage it increases, and when. A new complex could lure buyers with low levies but as soon as all the units have been sold and the developer is no longer involved to cover some of the costs, the levies could shoot through the roof, Rademeyer warns.
Full-title owners can choose when and how much they want to spend on general upkeep.
RENOVATIONS AND ADDITIONS BODY CORPORATE MONEY WOES
If the body corporate should become heavily indebted or misspend money, sectionaltitle owners unfortunately are saddled with the responsibility. As a sectional-title owner you have the right to see the financial statements and know what money is being spent on.