Sec­tional ti­tle vs free­hold: the pros and cons

Think care­fully be­fore you buy – your prop­erty should fit your per­son­al­ity and pocket

YOU (South Africa) - - CONTENTS - By LETITIA WAT­SON Send sug­ges­tions for top­ics and re­quests for info to your­money@you.co.za. We may an­swer your ques­tions in this col­umn but won’t re­ply per­son­ally. Sec­tional-ti­tle own­ers need writ­ten con­sent from their body cor­po­rate be­fore they can make

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.

AF­FORD­ABIL­ITY

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.

RE­SALE VALUE

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.

SE­CU­RITY

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.

EX­PENSES

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.

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