Types of Ownership
Category Advice
FREEHOLD
Freehold title usually applies to free standing homes in residential areas or on a small holding, but may also apply in certain gated estates. In freehold ownership you will own your portion of land (the plot) and the buildings on it. You will be reposnsible for all municipal charges such as rates, water, electricity, refuse removal and sewage as well as for insuring the property. For freehold property in a gated estate, a levy is paid to the homeowners association to maintain common property and cover security costs. Homeowners are also obliged to become members of the homeowners association (HOA) and abide by its conduct rules.
SECTIONAL TITLE
Sectional title properties are usually units in a block of flats or simplex or duplex developments. Each owner owns a section - the interior of the unit contained by walls, ceilings and floors - as well as a share in the common property, you may also be entitled to an exclusive use area that is part of the common property, such as a garden or carport. Sectional title owners are automatically members of the schemes body coporate and must abide by its conduct rules. You also pay a levy that covers the cost of running the complex as well as insurance, and usually covers the cost of water to the complex. Your share of the water costs is based on your participation quota, which is determined by the area of your unit and exclusive use area. In addition to the levy, each unit owner is responsible for municpal rates, electricity, refuse removal and sewage charges.
SHAREBLOCK
Shareblocks are classed as companies and each owner of a unit has shares in the company which owns the immovable property. The shares are usually allocated to different parts of the building, such as apartments, parking and gardens, and owners have the exclusive use of the parts of the building they have shares in. One of the drawbacks of a shareblock is that the directors can make decisions without consulting other shareholders. Also, owners cant use their shares as collateral for finance on other investments. This is also to the disadvantage of potential buyers because they cannot borrow 100% against shares, but may be able to get 100% home loans against sections in a sectional title complex.
FINANCIALS
Before buying a unit in a sectional title, gated or shareblock complex it is important to read the conduct rules and examine a set of recent financials. If you need mortgage finance to buy the property your bank will probably require up to date financial statements.
Author: Sally Woods Property Junction
