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The Sectional Titles Schemes Management Act a Game Changer

After a number of years of deliberation and delay, the Sectional Titles Schemes Management Act 2011 has been promulgated and subsequently signed into law. The Act contains a number of far reaching changes in the relationship between the scheme, developers and the members of the body corporate of which every owner of a unit in a scheme will need to become familiar with.

 

General Changes

 

While sectional title schemes specifically forecast and budget for the future (if managed correctly), there has not been, until now an obligation as to a prescribed minimum amount that must be set aside for this purpose. Issues surrounding the lack of obligation have led to one of most acutely identifiable changes in the rules being the establishment of a reserve fund for all schemes.

 

The reserve is to be funded by an increase in levies (the current suggested figure being 25% of the current levy of the scheme) and will be kept by the body corporate for the future maintenance of the scheme. The idea behind this is to keep consistency of the levy payments by reducing the need for schemes to raise special levies when faced with an emergency or unexpected major cost and should be seen as a positive step, provided the scheme can effectively manage these funds.

 

Rules surrounding proxies at meetings have been tightened and a person will now no longer be allowed to proxy for more than two other members at a meeting. The Act has formalised the obligations of the scheme to keep track of any changes in ownership of a unit and places the obligation on the scheme to ensure that the rules are presented to any new owners or tenants entering the scheme.

 

Schemes will now in addition be required to formulate a ten year plan for the scheme and developers who deviate from original plans may find themselves facing the wrath of a body corporate with new powers to oppose such deviations.

 

 

 

Dispute Resolution

 

In the past, the only realistic avenue for the settlement of disputes in sectional schemes has been through costly and time consuming litigation. This has often placed effective remedies out of the reach of the common unit owner often resulting in injustices.  The Act deals with the question of disputes in schemes through the use of the Community Schemes Ombud Service (CSOS). Any person may now apply to the ombud to assist them in disputes whether between unit owners or the scheme as a whole. The ombud’s powers are limited to some extent but currently encompass matters concerning financial issues, behavioural problems, governance as well as the relationships with managing agents and disputes regarding construction work on the private or common areas of the scheme.

The ombud will in addition to the resolution of disputes be responsible for general monitoring of the level of governance and quality of management in schemes as well as provide updates and education to members of the public informing them of their rights and duties in terms of the Act.

 

Pro Rata Levies

 

The new Act allows for the provision of a pro rata payment of special levies which provides for the situation where a special levy has been raised and is being paid off by the unit owner in instalments. When the unit is transferred, the pro rata amount of the levy not paid off may now be transferred to the purchaser who would then be obliged to pay off the remainder of the levy. The effect of this is certainly important in that it will be incumbent on sellers and estate agents to ensure they are up to date with the special levy arrangements between the scheme and members as well as ensuring that all prospective purchasers are informed in full about the situation. Since this provision is brand new, it remains to be seen exactly how it will be played out but, as in all cases, it is best to address the matter with all prospective purchasers before an agreement is concluded in order to avoid disputes during and after transfer.

 

Conclusion

 

The changes are certainly important and far reaching but with proper due process and management body corporates are now armed with a structured framework to manage their schemes and should in fact experience fewer problems going forward once the new rules have become routine. Further uniformity should bring more certainty to the general public as to functioning of schemes and provide a boost to good governance.

 

B. White – ESI Attorneys

How the Durbanville Nature Reserve is growing more than flora…

We in Durbanville are particularly fond and proud of our Durbanville Nature Reserve. A feature of our community life since the 1960s, it is a haven for indigenous plants and animals, and it has provided us with a window on the wild – a place to stroll, picnic, and generally to clear one’s head.

 

Less well known is the role it plays in sustaining our property market.

 

Around the world, the pressures of urban life have been driving a move to city fringes and so-called dormitory suburbs. There are various reasons for this, but one of them is a desire to get away from the concrete jungle. Literally. Cities may be sites of opportunity, but nature and greenery retains an intense appeal. They provide a calming refuge after the workday. They also provide a healthy backdrop for a childhood, giving youngsters non-digital spaces to explore and to imagine and to experience.

 

And while hard evidence is difficult to come by, research in the US and the UK suggests that being located near a nature reserve (or significant landscape feature) can have a noticeable impact on home prices – in some cases, raising them by as much as 18%. 

 

We are certainly finding that our little stretch of nature is a drawcard for buyers. Not surprisingly, it is a particularly popular feature among those looking for a permanent family home. It also enchants new arrivals to the Western Cape. It is both a wonderful aesthetic enhancement to a property in the area, and a great place to enjoy being alive. And this is helping to keep homes in Durbanville in demand and their values buoyant.

 

So here’s to nature and to our reserve! It is growing both our indigenous fauna and our home values. And it makes a powerful case that often the best role for “underdeveloped” space is to simply allow its natural charm to appeal to buyers.

How to determine the rental price of your investment property

Buyers looking to purchase an investment property to rent out often have difficulty determining the accurate rental price. There are many factors to consider and if you don’t assess your property value correctly you could end up over- or undercharging and neither are a situation you want to be in.

 

The accepted calculation standard for a long time has been to charge up to 1.1% of the property’s value in relative terms. Take note that as the property’s value increases the percentage of rental yield decreases because of the low demand for rental in high value properties. In some cases rental price go as low as the .7% mark.

 

 

A lot of other variables need to be taken into account, with one of the most important external factors influencing rental price being the location of the property. Suburb, sea views, amenities, schools, business districts, transport routes all play a major part in the demand for a rental property and often we will see homes of equal value and characteristics several kilometres apart charging completely different rental prices due to their location factors. Another key variable is supply and demand and depending on the current trend this will have a definite effect on your rental price.

 

 Once you’ve assessed the advantageous features of your property you need to research property comparisons in your area to get an idea of what the local standards are. Browse listings of estate agents or property portals and locate properties of similar value and features. In addition give the local estate agent a call, if they’re worth their salt they’ll be able to assist you and give you a great idea of what rental income you can expect. Consider every little detail.

 

Internal factors need to be assessed in conjunction with elements out of your hands, such as the condition of your property. In this instance you need to be very honest with yourself and identify any issues a tenant might have; cracks in the wall, paint peeling, cupboard space, kitchen size etc. You have to view your property through the eyes of somebody wanting to walk in and call your place home.

 

Calculate your bond repayments, levies and other expenses and compare them to a realistic rental income, this way you can determine what you can afford as well as decide whether you should let the tenant pay for water and electricity or if you’re able to absorb some of the costs to make the property more appealing.

Once you’ve evaluated all these guidelines and determined a price, gauge the ad response and demand for the property to assess whether your rental expectations are too high or too low. Demand is a great indicator of your property’s value as many tenants are knowledgeable of what realistic rent prices are. If the ad response is very bad, and you’ve ticked all the necessary marketing boxes, then maybe you’ve overestimated the rental price. Reassess and adjust your rental expectation slightly lower and then see what the response is. If on the other hand you get a huge response and are inundated with enquiries you can afford to push the price a little higher.  

 

In conclusion, all of these guidelines are only a drop in the ocean in comparison to the knowledge worthy estate agents have and it is undoubtedly still the best option, to find a local estate agent to assist you in managing your property. They will not only accurately measure your rental income but ensure all the legalities are followed and tenants are manged professionally and lawfully.

A Home in Durbanville: the Best of Both!

The Western Cape is the jewel in the crown of South Africa’s property market. Built on a combination of stunning natural beauty, sophisticated infrastructure and a robust, high-value economy, it is a magnet for both established high-flyers and aspirant up-and-comers – both from South Africa and beyond.

 

Wonderful opportunities beckon both buyers and agents, and nowhere is this more true than in Durbanville. As Denis Dunn, business owner of Harcourts Select, puts it: “For those seeking residential property – a new family home, a holiday spot, or an investment – it’s difficult to imagine a more attractive option.” 

 

Located in the northern reaches of Cape Town, Durbanville blends the best of the old and new. Bordering historical winelands, its spacious, elegant properties – both freestanding and in newer complex developments – offer a flavour of graceful, relaxed rural living. The adjacent Durbanville Nature Reserve literally brings the gentle wilderness to residents’ doorsteps.

 

Residents can meanwhile take advantage of the area’s numerous shopping, educational and cultural amenities. Family life is well catered for. Excellent sporting facilities, as well as its renowned craft market and the Wine Valley, along with visible architectural presence of hundreds of years of history make it a rich and stimulating place to live.  

 

Cape Town’s urban attractions, meanwhile, are easily accessible. The CBD is a mere 40 minutes’ drive, a modest commute for those working there.

 

Perhaps most importantly, Durbanville property is proving its worth as an investment. “In common with the rest of the Western Cape, value growth is outstripping that in other provinces and the country’s overall inflation. And with property prices starting from around R1m, it is surprisingly open even to first-time buyers,” explains Dunn.

 

Dunn further elaborates that we are seeing a lot of interest in Durbanville, both from those upgrading their homes and from those moving into the province. “It’s a wonderful place to raise a family, being uniquely part-urban and part-country. People migrating from elsewhere – we’re seeing a lot of interest from Gautengers – are absolutely entranced with what the area has to offer. A beautiful, safe, healthy and enriching environment. And one that will ensure the financial outlays are well rewarded!” He concludes.

 

What does the budget mean for property?

The 2017 Budget will add to the financial difficulties facing South African households. Tough times lie ahead, but they may prove to be a necessary step in addressing our fiscal difficulties.

Finance Minister Pravin Gordhan trod a fine line in attempting to bridge the gaps between South Africa’s pressing social needs, the fiscal integrity of the country, and the patience of the country’s stressed taxpayers. 



Tax increases through a new tax bracket of 45% for those earning over R1.5 million a year, as well as increases in dividend withholding rate from 15% to 20% are bad news for the property market. This will put a squeeze on higher-income earners. While it should not place too much pressure on their ability to service bonds on their homes, it will likely dissuade investment in second properties – such as holiday homes and rental properties.

Perhaps more seriously for the property market, increases in fuel taxes will take a bite out of the income of all South Africans. Fuel prices have knock-on effects on the economy as a whole, and will hit lower and middle-income earners particularly hard. Households in this segment of the market have already been struggling with South Africa’s general economic sluggishness, especially with elevated food prices.

Recent research has indicated that South Africans are increasingly failing to save or make provision for the future in order to service their immediate responsibilities. 

On the other hand, the increase in the threshold for transfer duties (from R750 000 to R900 000) is to be welcomed, and will provide modest relief for lower-income home buyers.

Overall, the budget offers little cheer for those with property investments. But it is important to note that the budget addresses a troubled economy. The difficult measures are necessary if we are to avoid a debt trap, and remind the world that the country’s economic fundamentals remain strong. With little room for manoeuver, Minister Gordhan performed his balancing act as well as can be expected. 

Property, it must be emphasised, is a long-term value proposition. Buyers and owners need to hold onto their investments tenaciously, even in the face of short-term hardship – appreciation is certain, especially when better times arrive again!