Sectional title investment: What does it entail and is my investment safe?
Sectional title properties have increased in popularity over the past two decades as it provides sought-after, lock-up-and-go residential accommodation with some built-in security measures.
Sectional Titles Schemes Management Act
The introduction of the Sectional Titles Schemes Management Act, Act 8 of 2011 and its regulations on 7 October 2016, did change the landscape of sectional titles to a certain extent. It became more regulated, increasing the popularity as an investment option, not only for the home buyer but more so for investors. It is still one of the most affordable means of becoming a property owner.
The new act places the obligation on bodies corporate to make enough provision for a reserve fund. The rationale behind the introduction of reserve funds was to eliminate the need for exorbitant and unforeseen special levies. It prevents the property from decreasing in value and aesthetical standards.
It also forces bodies corporate to plan for required maintenance through a ten-year maintenance, repair, and replacement plan coupled with a budget to make provision for the expenditure of such planned maintenance.
If the process is managed properly, and members of the body corporate have the opportunity to participate in the decision of planned maintenance, budgeting will curb nasty surprises such as huge special levies like painting a complex.
Body corporates must participate in proper and accurate forecasting to ensure the board of trustees can indeed meet the expectations and that required maintenance can be done regularly. The levy amount can’t be determined from an affordability point of view but should rather be determined from a long-term financial planning and proper decision-making point of view.
It is of utmost importance that the bodies corporate elect suitable candidates to the board of trustees that have the necessary expertise and sound financial principals. The board of trustees has a fiduciary responsibility to the management of the sectional title scheme and must ensure they keep up with legislative requirements and changes to the relevant act. Frequent training has become a necessity.
National Association of Managing Agents (NAMA)
National Association of Managing Agents (NAMA) has regular training sessions in various parts of South Africa to assist Trustees with proper and knowledgeable information. Being a member of NAMA since 2004 we highly recommend members of bodies corporate to budget for these types of training sessions as it will be money well spent.
Investors in sectional title developments now have the peace of mind that their properties will be looked after and properly maintained through these legislative requirements. Property investors can rest assured that with proper financial planning, the properties will be well maintained and modernised to keep up with property trends in surrounding areas. Areas will not become dilapidated and outdated as the years pass. The need for substantive special levies should be something of the past.
Selecting a managing agent
Equally important is the role of the managing agent. It is therefore important to make sure what the managing agent offers the body corporate.
The managing agent should be able to provide the body corporate with legislative advice; assist with the day-to-day management of the complex by providing the necessary assistance in maintenance, insurance, and proper legal advice as per the Sectional Title Scheme Management Act, Act 8 of 2011; and other relevant regulations.
The managing agent should be able to provide the body corporate with legislative advice; assist with the day-to-day management of the complex by providing the necessary assistance in maintenance, insurance, and proper legal advice as per the Sectional Title Scheme Management Act, Act 8 of 2011; and other relevant regulations.
It is of utmost importance to look at the contractual offering of a managing agent. Contract offering is different from complex to complex and agent to agent.
JM Venter Property Services CC
JM Venter Property Services CC has been a member of NAMA since 2004. At JM Venter Property Services CC, the following services are included as, but not limited to, contractual standard:
- Keeping of minutes and other administrative services pertaining to trustee instructions relating from meetings;
- Up to 10 meetings per year, including the Annual General Meeting. Additional meetings will be negotiated as and when needed. This is one of the features of our contracts that sets us apart from the rest;
- Financial management providing monthly financial management packs to the Board of Trustees;
- Assisting in obtaining body corporate insurance and assistance with claims;
- Drafting and distribution of communication to owners and residents;
- Drafting of annual budgets;
- Initiating annual independent audits;
- Payment of service providers;
- Assisting and drafting of Comunity Schemes Ombud Service (CSOS) hearing documents;
- Assisting with trustworthy maintenance teams, inhouse and outsourced;
- Assisting in maintenance and repair quotes; and
- Drafting of ten-year maintenance, repair, and replacement plans and budgets, adjusting it annually to comply with regulations;
JM Venter Property Services CC prides itself on attention to detail and building lasting relationships with clients. Clients are treated with integrity and honesty, giving them peace of mind that their investments are safe by ensuring that legislative requirements are met and bending backward to give a service unparalleled in the industry.
With JM Venter Property Services CC clients are not just numbers. Every client is treated as an individual with individual needs. You are ensured of a personalised service with sincere concern for the collective body corporate as well as the individuals living in a sectional title complex.
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