Having navigated the complex process of buying their first home, many first-time sellers understandably believe that the sale process will be a comparative walk in the park.
However, this is not necessarily the case as the sale transaction has its own unique set of requirements that are even more complex if the property is a sectional title.
Because an apartment or townhouse is part of a larger property with a community of owners and is overseen by a governing body, additional documentation is required and a number of additional factors apply and, if not known about or clearly understood, can present a number of frustrating and costly pitfalls.
Three property professionals offer expert guidance and advice to sellers navigating this process for the first time.
The trifecta of banks offering low or no deposit loans and reduced repayment instalments along with the low-interest rates and a strong buyer’s market has created an ideal buying environment, particularly for first-time homebuyers who have been jumping at the chance to enter the property market.
This is according to Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg, adding that sectional title homes are still the most popular choice with these buyers as they offer a more accessible step onto the property ladder.
Odendaal cautions that the sale transaction has its own unique set of requirements that are even more complex if the property is a sectional title.
“Selling an apartment or townhouse differs from selling a freestanding house in that it’s part of a larger property with a community of owners and is overseen by a governing body, the Body Corporate (BC).
“Therefore, in addition to the standard of documentation required for a sale, you will also need a levy clearance certificate from the body corporate. The buyer’s bank also needs documentation from the Body Corporate to assess the financial status and management history of the sectional title scheme before they approve a bond.”
He said that if a seller waits too long to request these documents, the approval process and the sale could be delayed. “And, although it’s not a legal requirement, it’s also a good idea to give prospective buyers a copy of the scheme’s rules and regulations before signing the offer to purchase.
“Some schemes have strict rules regarding factors like the number of occupants allowed per unit, pet ownership and exclusive use areas and, if they are not brought to the buyer’s attention beforehand, it can cause problems down the line.”
Tania Fourie, sectional title specialist for the group in North Riding, Olivedale, Jukskei Park and Johannesburg North, said that there are also a number of other factors that both buyers and sellers should be aware of when buying or selling sectional title property as they can have significant consequences.
“If the body corporate has an 80% quorum vote they can now prohibit units from being rented out on Airbnb which many owners in sectional title complexes find invasive and a security risk.
“It’s also prudent to check the city plans to see if there is any planned construction in the surrounding area as a new development could obstruct your views and are also likely to be noisy and disruptive.
“Finally, it’s essential that the managing agents are an efficient company with an experienced Body Corporate team with a good track record in place.”
Jenifa Manyukwi, a sectional title specialist for the group, said that sellers who embark on this transaction for the first time can be in for a rude, and often costly, awakening if they aren’t aware of what is required or if they leave everything until the last minute when a number of fees are due.
“Property owners are required by law to ensure that the property is legally fit for sale and before the transfer can take place, the transfer attorney must be in possession of the relevant Certificates of Compliance.
“While these usually only take a few days to acquire, circumstances around newly discovered issues which might require repairs, could not only delay the transfer but also seriously dent the pocket at a time when you can least afford it.”
“The seller’s conveyancer should also apply for the municipal rates clearance certificate as soon as possible so as to avoid any unpleasant surprises as un-anticipated outstanding amounts will have to be settled before the property can be transferred.”
Over and above these costs and agents commission, Manyukwi said that sellers must also budget for the following:
- Bond cancellation – conveyancer’s fee
This is the conveyancer’s fee for the cancellation of an existing bond over the property. To avoid further costs in the form of penalties, the seller must give the bank at least 90 days written notice prior to the intended cancellation of the bond.
- Body corporate and homeowner’s levy (if applicable)
The body corporate or homeowner’s association might require payment from the seller of a portion of the body corporate levy figures until the date of transfer.
- Municipal provision for rates and taxes
This covers all rates and taxes that are payable in advance by the seller. It varies from one local authority to another, in accordance with the valuation of the property but it is wise to budget an amount of around 4 times that of your average municipal account.
- Capital gains tax
This tax could apply if you sell your property at a profit, although there is a R2 million limit on “primary residence” sales.
“If sellers do their homework and take the time to familiarise themselves with the process and costs involved to ensure that they have covered all their bases, it will be a lot less stressful,” said Odendaal.