Buying a sectional title property? Here’s why assessing the body corporate is essential

When purchasing a sectional title property for the first time, prospective buyers often focus primarily on the property itself. While thoroughly inspecting the property is essential, it’s equally important to evaluate the governing body responsible for managing the sectional title scheme: the body corporate.

Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg, emphasizes this critical aspect: “The body corporate plays a pivotal role in maintaining the complex, enforcing rules, and managing communal finances.” Neglecting to assess the body corporate’s financial health, management effectiveness, and overall governance can lead to unexpected challenges down the line.

Why You Should Evaluate the Body Corporate Before Buying a Sectional Title Property

A well-managed body corporate can enhance your property’s value, quality of life, and long-term investment. Here are some essential areas to assess:

1. Shared Responsibilities

In a sectional title property, owners have private ownership of their units, but common areas—such as gardens, walkways, parking spaces, and pools—are managed by the body corporate. This entity is also responsible for maintaining building exteriors, including painting and structural repairs. Poor maintenance can directly impact both your quality of life and the resale value of your property.

2. Financial Health of the Scheme

Financial stability is one of the most crucial factors to evaluate. A poorly managed body corporate with low financial reserves may rely on special levies—additional fees imposed on owners to cover emergency repairs or upgrades to common areas.

For example, if a complex’s roof requires repairs but the reserve fund is insufficient, all unit owners will be expected to contribute. A financially healthy body corporate with robust reserves can minimize these unexpected costs, offering peace of mind and financial predictability.

3. Impact on Property Value

A mismanaged body corporate can significantly affect both the property’s overall appeal and individual unit values. Buyers may avoid complexes with high levies, poor maintenance, or management issues, which can lead to declining property values and difficulties in reselling. Over time, poorly maintained common areas can become liabilities, further impacting property prices.

4. Enforcing Conduct Rules

The body corporate is also responsible for enforcing the complex’s conduct rules, covering regulations on pets, noise levels, use of communal areas, and parking. Well-enforced rules help maintain a peaceful, orderly environment for residents. In contrast, a poorly managed body corporate may struggle to apply rules consistently, leading to resident conflicts and a decline in overall property appeal.

Key Factors to Evaluate in a Body Corporate Before Purchase

When assessing a sectional title property, ask for the following information to gauge the health and efficiency of the body corporate:

1. Financial Statements

Reviewing the latest financial statements of the body corporate can reveal its fiscal stability. Here’s what to look for:

• Healthy Reserve Fund: Sufficient funds for future repairs and maintenance indicate proactive planning.
• Debt Levels: If many owners are in arrears on levies, this can indicate financial instability, which may result in higher costs for all owners.

2. Monthly Levies

Understand the monthly levies and what they cover, as they usually fund communal maintenance, security, and insurance. Compare the levy amounts with similar properties in the area. Excessively high or low levies could indicate mismanagement or a lack of proper maintenance planning, which could lead to future issues.

3. Minutes of the Annual General Meeting (AGM)

AGM minutes can provide insights into the body corporate’s management style, unresolved disputes, and future plans. If there are ongoing conflicts or significant unresolved issues, consider it a potential warning sign. Watch for any planned special levies or major repairs that could increase future expenses.

4. Management and Conduct Rules

Review the complex’s conduct rules to ensure they align with your lifestyle. For example, if you plan to have pets, but the rules prohibit them, it’s best to know in advance. Understanding these rules helps avoid potential conflicts and ensures a smoother living experience.

5. Maintenance and Upkeep

Inspect the condition of common areas, such as gardens, pools, and other communal facilities. Poor maintenance may indicate that the body corporate isn’t prioritizing upkeep, increasing the risk of future levies for repairs or upgrades.

6. Security Measures

Evaluate the security arrangements, as properly managed security enhances the complex’s reputation and resident safety. Unmanned security points or outdated surveillance can be red flags for potential buyers.

Odendaal’s Final Advice: “When you buy into a sectional title scheme, you’re not just buying a property; you’re also investing in a community governed by a body corporate. Ensure it’s an entity that operates efficiently and in your best interests.”

By thoroughly assessing the body corporate, you can make a more informed investment in a well-maintained, financially stable environment, securing both your property value and your peace of mind.