Sectional Title - The advantages and disadvantages.
The concept ‘sectional title’ can be described as the separate ownership of units within a development. Such ownership is based on three features:
1. Individual ownership of the unit.
2. Joint ownership of the common property.
3. Membership of the owners’ association.
The purchaser of a unit in a sectional title does not only acquire ownership of the unit but also undivided shares in the common property. Further to this, the owner forms part of the owners’ association or body corporate allowing him/her to influence the management of the scheme. On the other hand, a ‘freehold or full title ownership’ can be defined as the transfer of ownership of an unlimited real right into the name of the purchaser. Therefore, the purchaser of such property will remain the sole owner of the land and the common property and all rights and obligations will vest within him/her.
The differences between the two modes of ownership acquisition will be evaluated by drawing attention to the advantages and disadvantages of each.
Advantages of purchasing a unit in a sectional title:
The reason why apartment ownership had been introduced into legal systems was due to housing shortage and the impeding element of the cost of purchasing and maintaining a freehold property.
The body corporate of a sectional title requires that each owner pay a fixed monthly levy for maintenance and upkeep cost incurred. Such levy will be payable in accordance with the participation quota attributed to each owner. The owners will, in addition to the monthly levy, only be liable to pay the rates and taxes for their unit, insurance for the contents of their home and the water and electricity usage.
Another characteristic of apartment ownership is the optimal use of the available land. The construction of a sectional title building can be done at a lower cost of land per unit in comparison to building freehold housing. In a sectional title, all the owners will be accountable for the maintenance and uphold of the structure of the property while a freehold property owner will bear the burden of all the costs.
A closer social life, ample amenities and additional security are all characteristics that describe a sectional title unit. While freehold housing focuses on privacy and any access to amenities, such as a gym, swimming pool and security needs to be provided and maintained for by the owner. Therefore, apartment ownership makes provision for the changing lifestyle of the community, providing leisure and security at the all-inclusive cost payable as a levy each month.
Disadvantages of purchasing a unit in a sectional title:
Purchasing and living in a sectional title unit is not always all love and romance. An owner of a freehold property will be in control of the entire property without interference of a governing body. An owner of a sectional unit needs to comply with all the Rules and Regulations provided by the body corporate in relation to the conduct and management of the shared scheme. Amendments to these Rules will only be able to occur at an Annual General Meeting. It is important to note that such changes cannot be a made by an individual disagreeing with the Rules and Regulation but by a majority vote.
These Rules and Regulations can also restrict an owner’s freedom to renovate, alter and expand his/her property. Before any such alterations can occur, the approval of the body corporate needs to be ascertained.
Joint and several liability is another characteristic of a sectional title unit which could adversely affect the financial position of an owner when mismanagement of the scheme occurs. All the owners of the sectional title will be jointly and severally liable for all debts incurred by the body corporate. In other words, in the event where an owner does not pay his/ her share, the other owners will be held accountable for the shortfall.
As discussed above, there are various advantages and disadvantages to owning a sectional title scheme that should be weighed up against each other when deciding upon a mode of ownership. An argument can be made that most of the disadvantages of a sectional title can be disregarded when one carefully investigates the functioning and financial stability of the apartment ownership. If a conclusion can be reached that the sectional title is well-managed with effective Body Corporate Rules and Regulations, one would be willing to become the owner of such a scheme.