South Africans living in estates face these extra costs

Many new estates include both freehold homes and sectional title (ST) schemes, meaning that buyers may face extra levies which can significantly increase total monthly costs.

In an effort to broaden their appeal and attract different types and ages of homebuyers, many new estate developments include one or more ST schemes as well as freehold homes.

These schemes generally offer townhouses or apartments that are more affordable for younger buyers or seniors, but still give them access to the full range of sporting, wellness, and community amenities on the estate.

However, Andrew Schaefer, MD of leading property management company Trafalgar, urged consumers to ensure that they understand the levy requirements before purchasing in these layered estates.

He said finding out what levies need to be paid in a layered estate can be tricky. These estates are managed by a Homeowners’ Association (HOA), but they may also include one or more sectional title (ST) schemes, each run separately by its own Body Corporate.

According to Schaefer, things can get even more complicated if each entity has a different managing agent.

“However, the way to untangle things is to refer to the founding Constitution or Memorandum of Incorporation (MOI) of the main or ‘master’ HOA to find out who or what is regarded as a member of that HOA,” he said.

“For example, in a layered estate with an ST complex built on one of the stands in the estate, the Constitution/MOI may say that the ST Body Corporate as a whole is viewed as a single HOA member.”

However, in other cases, the Constitution/MOI may confer membership on every individual owner in the ST complex. This makes a big difference to how levies are calculated and who can vote at the HOA meetings.

Different levy structures can mean higher costs

Schaefer explained that where the Body Corporate is defined as a single member of the HOA, it will only have one vote at HOA meetings.

It will also pay one levy to the HOA on behalf of all the owners in the ST complex. Each ST owner will have to contribute to that levy in addition to their normal ST monthly levy.

“In such cases, the division of responsibilities will usually also be relatively straightforward,” Schaefer said.

The HOA will typically take care of broader estate services such as perimeter and gate security, the internal roads and any lifestyle amenities such as a pool, gym or clubhouse.

The Body Corporate trustees will likely manage the maintenance and upkeep of the ST scheme, building insurance, and the payment of any specific amounts due to the local authority or other service providers.

On the other hand, Schaefer said, if the Constitution/MOI defines each individual owner in the ST scheme as a member of the HOA, they will each have a vote at HOA meetings.

They will also each be required to pay a separate monthly levy to the HOA in addition to their monthly levy in the ST scheme.

“This could mean a higher total levy amount, but would also mean that owners in the ST scheme had a say in the management of the estate as a whole,” Schaefer explained.

He added that some owners could regard this as important in preserving their investments’ value.

“This is why we advise prospective buyers to always first check what levies are payable to either the HOA or the Body Corporate in a layered estate and what each type of levy covers,” he said.

“This breakdown should be clearly set out in the purchase documents, and buyers should, of course, also check the financials of both the HOA and the Body Corporate before making a final decision.”