SECTIONAL TITLES NEED GOOD GOVERNANCE AND MANAGEMENT

SECTIONAL TITLES NEED GOOD GOVERNANCE AND MANAGEMENT

A recent report from FNB property economist John Loos has indicated that sectional-title property demand is on the rise in South Africa.

In the fourth quarter of last year, the FNB sectional-title house price index rose by 7.7% year-on-year, compared to the full-title house price index’s 6.4%. This was the eighth consecutive quarter that the sectional-title index has shown mildly stronger growth than that of the full-title index.

With the increase in sectional-title popularity, says Willem le Roux, director of Propell sectional-title finance management company, comes the need to ensure that those who buy and live in sectional schemes understand the need for good governance and management in order to protect their investments.

“With the cost of living increasing the way it has as well as interest rates set to rise this year, the need to live in smaller spaces and share the costs (as sectional-title developments allow) of amenities will be increasingly popular, and these developments must be managed well for them to maintain value and grow in capital value for their owners.”

“The basics for good financial management in sectional-title schemes starts with the owners, who should be willing to participate as trustees and be aware of what is going on in their scheme by attending meetings and being actively involved where possible. Regular meetings of the trustees should be held to discuss the day-to-day running of the scheme.”

He says appointing of a managing agent with experience and the right accreditation should be considered as the managing agent will know how to deal with many of the everyday challenges as well as more complicated matters.

The budget should be assessed carefully, not just for the year ahead, but for a five-year and 10-year projected period. The budget should show income compared to all expenditure, proposed maintenance and future reserve funds for larger projects.

The body corporate must have a proper debt collection procedure in place and keep arrears to a minimum.

“It is wise to manage the payments to creditors properly so that these accounts do not go into arrears. The trustees must communicates openly and regularly with the owners on the financial situation of the body corporate and if it is found that there is a problem, this must be dealt with immediately.

“Good management practices will show in the physical appearance of the scheme, such as well-maintained gardens, clean common areas and gates in proper working order. An attractive appearance makes the complex popular among people wanting to buy or rent, and ultimately supports growing property values,” says Le Roux.