Purchasing into a new sectional title development

When considering a purchase into a new sectional title scheme, there are few factors to take note of before signing on the dotted line.

Sectional title schemes (i.e. body corporates) are established once the 1st transfer takes place from the Developer to any other person, this may be months, if not years, after the agreement of sale is concluded.

Typically, a deposit is paid upfront and retained in an interest-bearing account by the Developer, and the balance of the purchase price payable upon transfer. In the mean-time though, the Developer will commence with putting services in place to ensure that on the date of occupation (which usually precedes the date of establishment), the scheme can function.

Occupation is offered once the municipality has issued an occupancy certificate, thereby confirming that the building (parts thereof) is in a habitable condition.

Prior to the establishment of the body corporate, the Developer must draft certain documents and a budget, to project the levies that will be payable from the date of establishment onwards.

Two such documents are the management and conduct rules.

It is important to review the rules before purchasing, as certain rules may not appeal to you.

A budget too needs to be drafted, as the levies will be based on same. This budget may be drafted months, if not years, before the establishment of the body corporate, so bear in mind that the levy quoted at the time of sale, need not be the levy that is applied at the establishment of the body corporate as services, utilities, plant and equipment, contracts are all yet to be finalized. Furthermore, inflation and escalation applies to the period between drafting the budget and the date of establishment of the body corporate.

Levies are not to be confused with occupational interest or rent. The latter may be charged by the Developer from the date of 1st occupation, and continue until the establishment of the body corporate, after which date the levies shall apply.

It is also important to understand the difference between the roles and responsibilities of the Developer to that of the body corporate, once established. This is dealt with in the Sectional Titles Schemes Management Act and regulations. All prospective purchasers should make themselves au fait with the Act and regulations, as these, along with the rules, will govern the scheme in perpetuity.