Legal experts at Cliffe Dekker Hofmeyr (CDH) have flagged a host of fees and duties that are often overlooked by homebuyers when they buy into sectional titles and gated communities.<\/p>\n\n\n\n
While moving into these properties are often attractive for the ease and sense of security they give, the firm warned that homebuyers could end up with bill shock if they don’t factor in the various associated costs of living there.<\/p>\n\n\n\n
“This lifestyle also comes with a bundle of recurring and once-off costs that you wouldn\u2019t typically have with a freestanding house,” said CDH senior associate Lutfiyya Kara.<\/p>\n\n\n\n
“It is therefore crucial to look beyond the surface-level expenses such as levies and ensure that you understand all the costs up front.”<\/p>\n\n\n\n
Kara noted that sectional title schemes give purchasers ownership of their section, while sharing common areas in the scheme with other unit owners.<\/p>\n\n\n\n
This forms a collective ownership scheme under a body corporate that maintains and administers the scheme.<\/p>\n\n\n\n
Similar structures play out in gated communities and estates, where a homeowners’ association fulfuls certain obligations and administrative tasks related to the day-to-day operations of the scheme.<\/p>\n\n\n\n
These structures are funded through levies.<\/p>\n\n\n\n
Sectional title schemes in particular are required to maintain two funds: an administrative fund for routine expenses and a reserve fund for major repairs, and levies are used to build both.<\/p>\n\n\n\n
The levies themselves will vary hugely by scheme, Kara said, where basic complexes can have low levies, and luxury estates with pools, gyms and 24\/7 security can be much higher.<\/p>\n\n\n\n
Levies are the first and most obvious cost associated with living in these kinds of environments, but Kara warned that there are many other costs that are not as apparent, or may catch purchasers off guard.<\/p>\n\n\n\n
Since 2016, body corporates have been obliged to plan for long-term maintenance (a 10-year maintenance\/repair plan is common), which is designed to prevent the sudden imposition of special levies for big maintenance issues.<\/p>\n\n\n\n
If the reserve fund is too small, trustees can either raise regular levies or impose a special levy to cover large, unexpected or unbudgeted-for costs (e.g. roof replacements, major plumbing\/electrical work, structural repairs, etc). <\/p>\n\n\n\n
Special levies can be material and are often payable as a lump sum. They are the main \u2018surprise\u2019 cost that buyers should watch out for.<\/p>\n\n\n\n
Sectional schemes must also contribute to statutory oversight bodies. A small Community Schemes Ombud Service (CSOS) levy is charged to owners and collected quarterly.<\/p>\n\n\n\n
This is capped at a modest amount, in accordance with the formula and limits set by law. Make sure you know whether your managing agent already collects this levy and how it\u2019s charged.<\/p>\n\n\n\n
Living in a managed residential scheme does not always remove municipal bills. <\/p>\n\n\n\n
Some schemes bulk-buy water\/electricity and recover costs via levies or prepaid meters; in other cases, each unit is separately rated, and the owner pays their own rates and utilities. <\/p>\n\n\n\n
Owners should understand exactly how the scheme handles municipal rates, refuse, sewerage, water and electricity costs and whether any shortfalls are recovered from owners via levies or special charges.<\/p>\n\n\n\n
Security (guards, cameras, electric fencing), pool and gym upkeep, garden maintenance, lift contracts and cleaning expenses are routinely paid from levies. <\/p>\n\n\n\n
The more amenities, the higher the running costs. If you value those services, remember that someone pays for them every month \u2013 whether they use the pool or not.<\/p>\n\n\n\n
The body corporate normally insures the building structure and common property; however, each owner must insure the interior of their unit (contents and, often, improvements\/fittings). <\/p>\n\n\n\n
Check the body corporate insurance cover and the excess amount payable. If a claim affects the whole scheme, excesses or shortfalls can be paid from levies or by way of a special levy imposed on the owners.<\/p>\n\n\n\n
Due to the high risk of load shedding in South Africa, most sectional schemes have introduced a charge for diesel to each owner in the scheme. <\/p>\n\n\n\n
This aims to cover the costs of running a generator at the complex during the load-shedding periods. <\/p>\n\n\n\n
This cost is usually not a constant monthly cost but can appear on an owner\u2019s levy statement in the months when load-shedding peaks.\u00a0<\/p>\n\n\n\n
When buying into a scheme, expect standard conveyancing costs (transfer and bond registration) plus scheme-specific administrative costs such as rates-clearance, levies in arrears, an administration fee for issuing the certificate of compliance, and occasionally a new owner admin fee charged by the managing agent. <\/p>\n\n\n\n
These costs are usually payable prior to transfer as a levy clearance certificate needs to be issued by the body corporate before the transfer can be lodged at the relevant deeds registry.<\/p>\n\n\n\n
If owners fall behind, the body corporate may charge collection fees, legal costs, interest on arrears or fines for rule breaches. <\/p>\n\n\n\n
Managing agent fees, auditor fees and ad-hoc consultant fees (engineers\/specialist contractors) also appear in budgets, and these costs can inflate levies if not well-managed.<\/p>\n\n\n\n
Kara said that if there is any doubt or confusion around the fees being levied, owners can find out exactly where the money is being directed.<\/p>\n\n\n\n
For those looking to get into these kinds of schemes, buyers have options as well:<\/p>\n\n\n\n
“Scheme living offers many conveniences and, most importantly, a sense of security when living in South Africa, but those conveniences and safety features come at a cost and are paid for by way of levies and occasional special charges,” Kara said.<\/p>\n\n\n\n
“Smart purchasers treat levies like a mortgage instalment: non-negotiable, recurring and essential to preserve value.”<\/p>\n\n\n\n
“Do your homework on the scheme\u2019s finances, ask for the documents listed above, and build a contingency into your budget for unexpected special levies.”<\/p>\n","protected":false},"excerpt":{"rendered":"
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