What is Sectional Title?
Sectional title is a form of property ownership which allows separate portions of a specific property to be owned by different individuals. This could be, for example, a unit in an apartment block, a townhouse in a residential complex, or a unit in a commercial or even industrial scheme.
What is a Section?
A section is defined as an area, generally surrounded by walls, floors and a ceiling which is exclusively owned. The median line (the centre line of the walls, floor and ceiling) forms the boundary of the section.
What is Common Property?
The common property is generally defined as all communal areas within the complex. This includes roads, gardens, swimming pools and amenities, as well as areas such as entrance halls, corridors and stairwells. It is therefore any part of the property which is not owned by an individual person, and, in general, all owners are entitled to use it. The common property is owned in undivided shares by the owners of the sections of the scheme.
What is an Exclusive Use Area?
This is an area of the common property which is reserved for the use of a particular owner. Examples of exclusive use areas would be parking bays, private gardens or private yard areas. Exclusive use areas would be clearly shown on the sectional title plan or in the registered rules of the scheme, and would be considered part of the unit that they are attached to.
What is a Participation Quota (“PQ”)?
This is the percentage of your total floor area compared to the total floor area of the scheme, not including common property. The PQ is used to determine your share of the levies, your voting rights on the body corporate, as well as your liability for any debts of the body corporate.
What is the Body Corporate and what is its role?
The body corporate is a statutory body consisting of all the owners within the sectional title scheme, which is responsible for managing the scheme. The Body Corporate looks after the day-to-day running of the scheme and its financial affairs to the benefit of all the owners. It sets and collects the levies, looks after the maintenance of the common areas, pays rates, taxes and communal expenses, and enforces the rules of the scheme. The body corporate appoints trustees – a selection of owners - at an annual general meeting to take responsibility for the management of the scheme. The trustees work on a voluntary basis and select a chairman. As trustees are usually working people they appoint a professional property management company (managing agent) to manage the administration of the scheme on their behalf. The trustees, however, remain the decision makers of the scheme when the managing agent is in place.
What are the ‘Rules’, and can the rules in my development be changed?
Rules are put in place to ensure that the scheme is properly run, and to regulate the behaviour of owners. The rules are there to protect the owners and ensure that their use of the scheme is not compromised. Rules generally consist of ‘management rules’ which govern the conduct and procedures of the Body Corporate, and ‘conduct rules’ which govern the conduct of owners in the scheme. The rules are put in place by the Body Corporate. Rules can be changed, but only by agreement.
What is the ‘Levy’ and how is it calculated?
The levy is the owner’s contribution to the costs associated with running the sectional title scheme. The costs of the scheme include utility costs, taxes, insurance premiums, repairs and maintenance of the common properties, salaries and wages, administration costs. A budget is prepared by the body corporate annually, and the costs are proportioned to the owners in accordance with the Participation Quota of each section. The levies are collected on a monthly basis. Trustees can also impose a special levy where extra funds are required for different reasons, for example, painting of the common property. Note that your levy only covers the maintenance of the common property and does not cover maintenance within your section.
When should we consider using a Managing Agent?
Managing agents can be appointed to do the administration of the scheme on behalf of the body corporate and the trustees. A managing agent would prepare the annual budget, calculate and collect the levies, pay the accounts, arrange insurance, and arrange quotes for repairs and maintenance of the common property. They would also ensure that all the statutory requirements of the scheme are complied with, convene meetings and provide advice to the Trustees on matters relating to the running and finances of the scheme.
What should we look for in a Managing Agent?
Look for an administrator who has strong and reputable financial systems, is well versed in the prevailing acts, has a good track record and is registered with both the Estate Agency Affairs Board and the National Association of Managing Agents.
How does a Managing Agent charge?
Your managing agent may charge a set rate per unit, a percentage of levy income or at a rate per square metre. Extra costs may also be incurred for additional services including the submission of tax returns, accounting services, payroll administration and attending to meetings outside the terms of the contract etc. Professional managing agents with experienced staff and good systems may charge more than other agents, but the benefits of strong management generally far outweigh the extra cost.