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Buying Property

Category : Buying Property

Buying your first property in South Africa – A ‘How To’ Guide

Tarleys Trust 0 comments 22.01.2016

For first time buyers considering property in South Africa, the process is both hugely exciting, and immensely scary. Knowing how to go about securing a home loan, and what steps, documents and procedures you need to follow in order to buy your dream home can be tricky if you have never taken the plunge before, and with friends and family all adding even more confusion by offering conflicting advice, it can make the entire process something of a nightmare. Before you give up and resign yourself to a lifetime of renting, consider these expert tips from property management service experts:

  • Know your budget and agree on a price limit

Chances are good that you are purchasing property with a wife, husband or long-term partner. Together, you will need to work out your joint budget, and decide how much you can afford to spend on property in South Africa. Much as you may be dreaming of owning that beautiful four story mansion in Constantia, if your income does not allow you to budget sufficiently, you will not be able to secure a home loan. If you choose to go with a joint loan however, you will be able to apply for a greater loan than you would if applying for a single loan – this often amounts to about 25-30% of your joint income in total.

  • Understand the bond process and what it means for you

The minimum amount for a home loan in South Africa is about R100, 000. Another key thing to consider is whether you can afford a deposit towards the loan, as this will affect a number of things, including the interest you may need to pay on your loan. When your loan application is received, the bank will determine the Loan-To-Value ratio (LTV) – this is basically the ratio between the loan you require, and the value of the property in question. The lower the LTV ration, the lower your interest rate will be.

  • Get all your documents and information together

Once you are ready to put together your application, you will need to have the following documentation ready to give to the bank. In the case of joint loans, both parties will need to provide these documents:

  1. Copy of your ID
  2. If you’re full-time employed, three months bank statements
  3. Your offer to purchase
  4. Most recent payslip or in some cases, up to six months payslips.
  5. Self employed business owners will need the following:
  • Six months business accounts statements
  • Six months personal bank statements
  • Proof of monthly income

To qualify for a home loan to purchase property in South Africa, you need to meet certain requirements. You need to be over the age of 21, be employed for at least two years (or self-employed for at least six months) and be earning a minimum of R10,000 joint or single income and have a clear credit history with no defaults or judgements. If you meet these requirements, then you can begin the first steps to purchase your dream property in South Africa.

Duties of Owners in a Sectional Title Scheme

Tarleys Trust 0 comments 22.01.2016

The duties of Owners in Sectional Title Schemes is clearly laid out in Section 44 of the Sectional Titles Act 95 of 1986 as follows:-

(1) An owner shall‐

(a) permit any person authorized in writing by the body corporate, at all reasonable hours on notice (except in case of emergency, when no notice shall be required), to enter his section or exclusive use area for the purposes of inspecting it and maintaining, repairing or renewing pipes, wires, cables and ducts existing in the section and capable of being used in connection with the enjoyment of any other section or common property, or for the purposes of ensuring that the provisions of this Act and the rules are being observed;

(b) forthwith carry out all work that may be ordered by any competent public or local authority in respect of his section, other than such work as may be for the benefit of the building generally, and pay all charges, expenses and assessments that may be payable in respect of his section;

(c) repair and maintain his section in a state of good repair and, in respect of an exclusive use area, keep it in a clean and neat condition;

(d) use and enjoy the common property in such a manner as not unreasonably to interfere with the use and enjoyment thereof by other owners or other persons lawfully on the premises;

(e) not use his section or exclusive use area, or permit it to be used, in such a manner or for such purpose as shall cause a nuisance to any occupier of a section;

(f) notify the body corporate forthwith of any change of ownership in his section and of any mortgage or other dealing in connection with his section; and

(g) when the purpose for which a section is intended to be used is shown expressly or by implication on or by a registered sectional plan, not use nor permit such section to be used for any other purpose: Provided that with the written consent of all owners such section may be used for another purpose.

(2)

(a) Any owner who is of the opinion that any refusal of consent of another owner in terms of the proviso to subsection (1) (g) is unfairly prejudicial, unjust or inequitable to him, may within six weeks after the date of such a refusal make an application in terms of this subsection to the Court.

(b) If on any such application it appears to the Court that the refusal in question is unfairly prejudicial, unjust or inequitable to the applicant, and if the Court considers it just and equitable, the Court may with a view to bringing the dispute to an end make such order as it deems fit, including an order that it shall be deemed that the requirement stated in the proviso to subsection (1) (g) is met, an order that the provisions of section 14 of this Act which the Court deems appropriate, shall be applied with reference to the amendment of the registered sectional plan in question, any other supplementary order as the Court deems fit, and an order concerning costs as it deems appropriate.

The National Credit Act

Tarleys Trust 0 comments 22.01.2016

The National Credit Act, Act 34 of 2005, more popularly known as the colloquial term, "the NCA" became fully operational in South Africa on 1 June 2007.

The NCA replaces the Usury Act, 73 of 1968, the Credit Agreements Act, Act 75 of 1980 and the Integration of Usury Laws Act, 57 of 1996, which was the primary legislation governing the granting of credit within the financial services industry since 1968.

The NCA, though overshadowed by much contention, should be seen as a positive step in the development of South African Law ensuring citizens are not over-extended with credit which they are unable to repay or to service the payments on a monthly basis.

Although it has caused must strife among estate agents, property developers, sellers, bond originators and buyers, the positive aspects of the act should be borne in mind before any broad attack is launched against this legislation.

The proverbial belt-tightening began at the time of implementation of the Act but has since relaxed slightly to allow people to operate within the confines of the Act rather than be restricted by it.

The main purpose of the Act can be summarised into the following points:

  • To promote a fair, competitive, accessible, equitable and sustainable credit market.
  • To educate consumers so that they are empowered to make informed choices, borrow responsibly and within their means.
  • To enforce affordability assessments within the lending process to prevent reckless lending and/or borrowing.
  • To protect consumers who feel they have been unfairly treated in a credit agreement by giving them access to a National Credit Regulator and the National Consumer Tribunal.
  • To provide a debt counselling process for consumers who are not able to find a solution for their inability to repay their debts, in conjunction with their credit providers.

 

The following are the main institutions that are effected by the Act:

  • Banks
  • Loans
  • Mortgage Bonds
  • Overdrafts
  • Credit Cards
  • Vehicle Finance
  • Other Personal Finance

 

Retailers:

  • Furniture Finance
  • Clothing Accounts
  • Store Cards
  • Any other type of Credit or Finance from retailers

 

Other Categories

  • Micro-loans and pawn transactions
  • Any other type of credit or loan provided to you

 

The preamble to the Act provides particular insight into the positive aspects of law the legislation seeks to protect:
To promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit and improved standards of consumer information; to promote black economic empowerment and ownership within the consumer credit industry; to prohibit certain unfair credit and credit-marketing practices; to promote responsible credit granting and use and for that purpose to prohibit reckless credit granting; to provide for debt re-organisation in cases of over-indebtedness; to regulate credit information; to provide for registration of credit bureaux, credit providers and debt counselling services; to establish national norms and standards relating to consumer credit; to promote a consistent enforcement framework relating to consumer credit; to establish the National Credit Regulator and the National Consumer Tribunal; to repeal the Usury Act, 1968, and the Credit Agreements Act, 1980; and to provide for related incidental matters.

What is Sectional Title?

Tarleys Trust 0 comments 22.01.2016

We've spent a lot of time discussing the fundamental aspects involved in Sectional Title Management, but have not previously addressed the question of what exactly Sectional Title is.

There seems to be a lot of misunderstanding regarding the concept of Sectional Title, we detail the concept and consequences of a Sectional Title scheme which all should be understood before buying into a Sectional Title scheme.

Sectional Title came about to allow a person to purchase a Section of a building or property. A logical question which stems from this action is the question of ownership of non-sections (ie. stairwells, walkways and passages, refuse rooms, etc), these are owned by the collective owners of Sections in undivided shares. A Managing Agent is usually appointed to manage the common property on behalf of the Body Corporate.

A Body Corporate comes into existence at the time the first Section is transferred out of the name of the developer. The developer therefore usually appoints the Managing Agent.

The main financial consequence to a Sectional Title owner is that he or she has to pay a levy, determined by the Body Corporate at Annual General Meetings, for the running of the Body Corporate. This figure is usually fixed for per year and should encompass all foreseeable (and make provision for unforeseeable) expenses throughout the ensuing year. Special Levies may also be implemented for some items should there not be sufficient funds to perform certain repairs or improvements.

As a person buying into a Sectional Title scheme, should always request a copy of the audited financial statements. This will put the financial standing into perspective as nobody would want to buy into a financially troubled Sectional Title Scheme.

The reputation of the Managing Agents is also important as they hold the finances belonging to the Body Corporate, one should always be certain that sufficient checks and balances are in place and that the Managing Agent cannot steal the money belonging to the unsuspecting Body Corporate.

Sectional Title is currently governed by The Sectional Titles Act (95 of 1986) which sets out the requirements, functions and duties of the Body Corporate.

See our article on the Functions of Managing Agents to find out more about what the Managing Agents do for the Body Corporate

Sectional Title 101

Tarleys Trust 0 comments 22.01.2016

Sectional Title 101
By: Bradley M Berman & Jaclyn M Berman

Capture

1. Introduction

One of the most popular trends in the South African housing market is that of Sectional Title Ownership.

Sectional Title allows Owners to be part of a Sectional Scheme, allowing a significant reduction in the price of Property Ownership.

Many Owners are often confused about certain Sectional Title concepts which we have attempted to address in the hope of achieving a greater understanding of Sectional Title.

2. What is Sectional Title?

Sectional Title occurs when an ERF (a piece of land) is divided into many sections which are sold to individual owners who then own their section as well as their portion in undivided shares in the common property.

The most common example of Sectional Title is a complex divided into many units, each of which is individually owned. It is not limited to this example as a Scheme can comprise of freestanding houses as well. The common property comprises of all areas which do not form part of sections (ie. Stairs, passages, communal pool, etc).

3. What are my responsibilities as an Owner in a Sectional Scheme?

As an Owner, your responsibilities are to not infringe upon the rights of other owners and to make timeous payment of levies to the Body Corporate as well as payment of the applicable Rates to the City of Cape Town.

4. What is a Body Corporate?

A Body Corporate comes into existence at the time the first transfer takes places from the developer or entity responsible for the opening of a Sectional Title register. A Body Corporate is an independent legal subject which is represented by the Trustees in terms of the mandates and powers conferred upon them in the Management Rules and as decided at the Annual General Meetings from time to time. Most Bodies Corporate appoint a Managing Agent to attend to the many tasks Trustees are burdened with and make the necessary representations on their behalf.

The Body Corporate is formed in order to ensure the day-to-day tasks of running and maintaining the building are performed, and any obligations of the owners and Trustees in respect of the common property are fulfilled.

5. What is an Annual General Meeting (AGM)?

An Annual General Meeting is a meeting which usually takes place once a year, within 4 months of the financial year-end of the Body Corporate.

This is where the Trustees are elected and the powers, directions and restrictions of the Trustees and Managing Agents are conferred upon the respective parties.

6. What are Conduct Rules?

Conduct Rules are the rules of the complex which every owner should be fully acquainted with. These rules confer certain directions, restrictions and sanctions to residents of the complex, all of whom are equally bound by the same rules in order to ensure harmonious living amongst all residents within the Scheme.

It is a legal requirement that the Conduct Rules are attached to every lease in respect of Sectional Title property. The failure to attach the Conduct Rules to a lease may render it void. It is for this reason that residents may never claim they are unaware of the contents of the Conduct Rules.

7. What are Management Rules?

Management Rules are the rules conferring certain directions, restrictions and powers relating to the Management of the Sectional Title Scheme to the representatives acting on behalf of the Body Corporate.

8. What are the Body Corporate’s Responsibilities?

The responsibilities of the Body Corporate are simply to ensure all rules are being followed, the common area is maintained to the standard to which it should be, the levies are paid on time by the owners. Should an owner fall into arrears, the Body Corporate is mandated to take appropriate action against the owner who has failed to fulfill his obligations.

9. What is a Managing Agent?

A Managing Agent is appointed to Manage the affairs of the Body Corporate on behalf of the Trustees and Owners. Managing Agents act on instruction of the Trustees.

The Managing Agent is the interface through which owners communicate with the Trustees of the Body Corporate.

10. What are Levies?

Levies are payable by each owner in proportion to the size of their Section/s seen against the total square meterage of all the sections (expressed as a percentage). This is known as a participation Quota

[Example: 10 units of 15/m2 each will total 150/m2 of individually owned sections. Each unit therefore owns 10% of the common property in undivided shares and the owners are liable for a 10% contribution towards the levies.

Levies are made up of the annual expenses (or foreseeable expenses) as decided at the Annual General Meetings. Any surplus remaining after payment of monthly expenses is invested into a reserve fund for future use which attracts a higher interest rate as compared to the current account.

11. How does the insurance for the building work?

The Body Corporate (and usually, the Managing Agents) are responsible for insuring the building adequately. The insured amount is reviewed annually at the Annual General Meeting.

The structure of the building is insured but not the land on which the building is built. The insured amount is based on the cost of rebuilding the building in the event of destruction. Various other items are also encompassed in the insurance policy. Ie. Geysers, burst pipes, etc.

Please see our Sectional Title insurance article for more information.

12. Who are Tarleys Trust and how do they fit into the picture?

Tarleys Trust Property Group is a company which services many aspects of the property industry. One of the many functions performed is the management of Bodies Corporate.

Tarleys is therefore the interface between the Owners and Trustees who manage the various aspects of the day-to-day running of the common property as well as the collection of levies and the administrative functions of the Body Corporate.

Any problems relating to the common property or running of the common areas should be directed to Tarleys for the appropriate assistance, failing which they will direct you to the appropriate person for speedy resolution to the matter.
13. How to read our statements

Statements are sent out on a monthly basis, the date of the statement can be found on the top Right hand corner of the statement. Should any payments be made after the date on which the statement was printed, these payments will not reflect on that statement.

Please always check your statements to ensure payments have been captured correctly. Should any payments not be captured please send proof of the deposit to the accounts department (accounts@tarleys.co.za) who may then allocate the funds correctly.
It is very important to always use the reference given at the bottom of the statement as this facilitates for the correct capture of all amounts paid.

Levies are payable by the 7th of each month, in advance, and are payable regardless of whether or not a statement has been received.

14. What do I do in case of an emergency?

The first determination that should always be made is the cause of the problem. Determining the cause will usually lead you to the responsible party and consequently the person with whom you should be dealing.

As the Body Corporate may not concern itself with matters within an owners individual section, any emergency which stems from either the outside of the section (including another owners section) should be directed to the Managing Agent for assistance. The portfolio manager for your complex will be able to assist you with the appropriate action which will need to be taken in the case of an emergency.

Our online helpdesk can be found on our website (www.tarleys.co.za) and can be consulted as a guideline for assistance.

Emergency after hours support is also provided to our clients and can be reached on 084 TARLEYS (8275397)

What to look for when buying into a Sectional Title Scheme

Tarleys Trust 0 comments 22.01.2016

Many people these days don’t really know what to look for when buying into a Sectional Title scheme. It’s important these days to know exactly what you’re buying into and with who.

One of the first things to look at is who the Managing Agents are. The harsh reality is, Managing Agents obtain a reputation for being any or all of either helpful, trustworthy and knowledgeable or unhelpful, untrustworthy and stupid.

One of the other and arguably most important aspects is the latest set of audited financial statements. Audited financial statements are drawn up annually to reflect an independent and analytical view of the Body Corporate and its finances. These should be scrutinised carefully to ensure the solvency and liquidity of a Body Corporate.

Nobody wants to buy into a financially volatile Body Corporate. Reserves are important as they reflect the ability to do improvements and repairs as the years go by without having to call for Special Levies which can take anyone by surprise.

The levy amount is also of paramount importance. Experience has taught us that levies are usually one of the last payments on the list. This causes severe strain on any Body Corporate and makes it impossible to function at an optimal level.

Rates have also caused a great deal of confusion as, since 2007 they have been payable by the individual owners and not by the Body Corporate. Given that rates are issued by the relevant municipality, it can often take a few months before your first statement gets issued. This can cause a great deal of financial uncertainty. Don’t ever think that you’re getting a free ride because the municipality will slap you with a statement when you least expect it.

If possible try meet the Managing Agents, the chairperson and the Trustees to make sure they know what’s going on.

Know Your Body Corporate Rules

Tarleys Trust 0 comments 22.01.2016

Although buying into a sectional title scheme offers a certain level of security to a vast majority of safety-conscious South Africans, problems can arise if those buying into this type of investment do not read the fine print of the body corporate rules and ensure that the scheme is in sound financial order. We address this issue more fully in our article entitled “what to know before buying into a Sectional Title Scheme”

There are many reasons that this type of scheme has become so popular amongst South Africans, one of them being that it offers entry-level investment buying prices with a far reduced risk factor as many costs are shared between the owners in proportion to their participation quota.

Generally speaking, the costs of maintaining the units are also lowered because exterior maintenance work is budgeted for and future expensive repairs are decided and planned for well in advance.

However, there are rules governing these schemes and anyone considering investing needs to ask an agent for a copy of the Body Corporate rules and financials before signing any sales agreement. Any prospective Sectional Title purchaser should also be acquainted with the laws and rules as contained in the Sectional Titles Act.

These rules establish what the current owners find acceptable within the confines of the scheme and lay out exactly what owners can and can’t do. One should also bear in mind that it is a legal requirement to attach the rules to a valid lease agreement when renting out a Sectional Title unit to tenants. These rules are not made on a whim and the regulations applicable to the scheme must be registered in the Deeds Office in order for the rules to be enforceable.

One of the more contentious issues revolves around pet ownership. Buyers should never assume that just because they have seen a small dog wandering around the complex that this means that the trustees allow unit owners to keep pets in the complex. It is always advisable for homeowners to confirm in writing with the body corporate that they do indeed allow pets within the premises.

Anyone considering buying into a scheme should also request to see the financial statements of the body corporate as this will give a clear indication of the liquidity of the scheme. It is essential to ensure that there is enough money in the kitty to take care of not only the day-to-day expenses, but also any planned or unplanned maintenance costs. It is also important to ensure that the debtors of the Body Corporate are being adequately dealt with.

Special levies are also very often a bone of contention. Sellers often fail to disclose that a special levy has been introduced to cover additional expenses. With this in mind, it may also be a good idea to ask to see the minutes of any meetings held by the trustees in the preceding 12 months as these can often alert potential homeowners to problems that the complex is currently experiencing.

As with any property investment buyers need to do their homework thoroughly. For those investing in a sectional title scheme, the body corporate rules are the best place to start.

The cost of not paying levies

Tarleys Trust 0 comments 22.01.2016

It is often alleged that the trustees of sectional title schemes lack the power to enforce Body Corporate rules. Before embarking down this particular avenue, owners should know the complete scope of the powers of the Managing Agents and the Trustees.

Sub-rules (5) and (6) of Rule 31 makes defaulting owners liable for all legal costs involved in the collection of unpaid contributions as well as any legal costs incurred in forcing an owner or his tenants to abide by the Body Corporate rules.

Furthermore, the sub-rules specifically allow the trustees to charge interest on arrear amounts at a rate which is within their power to determine.

Rule 31 (6) permits the trustees to charge interest not only on the unpaid levies but also on the unpaid interest amounts.

Defaulting Owners should bear in mind that the piggy-backing of paying owners is a dangerous and vulnerable situation to be in.

The provisions of the sub-rules above permit recovery of fees for collection (ie. Administration fees for ‘chasing’ the defaulting owner) as well as interest (ie. The Body Corporate has been deprived of these funds during its regular course of business).

A property is unable to transfer until a Levy Clearance certificate is issued by a person competent to do so. This means that your transfer could be significantly delayed if arrangements are not made to the satisfaction of the Body Corporate to ensure the recovery of funds.

Sectional Title rights and obligations

Tarleys Trust 0 comments 21.01.2016

Sectional Title has become one of the most popular forms of Ownership throughout South Africa. In practice, we have found that many Owners do not know what their rights and obligations are as an Owner in a Sectional Title Scheme.

In a sectional title scheme, trustees are not entitled to make any decisions or rules which conflict with the rules of the Act unless the rules are changed in accordance with the rules provided for by the act or other rules registered for the scheme.

Trustees should be warned of taking it upon themselves to act unilaterally in situations.

The Sectional Title Act requires the appointment of a minimum of two trustees and the maximum number of trustees is determined by the owners at the Annual General Meetings.

Owners are entitled to attend trustee’s meetings although they are not entitled to receive notice of Trustee’s meetings nor to vote at such meetings.

Trustees that are going to be absent from trustee’s meetings are not entitled to appoint a Trustee to act in their place and, as such, one must be certain of their willingness to act before accepting such a nomination. It is the trustees, and not the body corporate that elect the chairman to represent the board of trustees.

It is important to note that the chairman has no more obligations or entitlements than a regular trustee. The only difference, in practice is that the chairman has a casting vote in the case of an equal number of votes.

Voetstoots and the Consumer Protection Act

Tarleys Trust 0 comments 21.01.2016

There has been some debate with the implementation of the new consumer protection act surrounding the popular "voetstoots" clause used in contracts.

Some property law commentators have argued that the seller and his agent will no longer be protected by the fact that a defect was not apparent to them at the time of transfer, as the new law stipulates that every member of the ‘supply chain’ can be held responsible for any serious defect in the ‘product’ for a period of six months after purchase. Other commentators, however, have said that the rules applying to a building cannot feasibly be the same as those for services or manufactured goods  - if only because the sums involved can be so much higher and replacements are not possible in the property world.

Although the precedent set has traditionally be one of "let the buyer be aware", recent legislation and commentaries seem to overlook the issue by extending benefits to the Purchaser which are beyond the scope of reasonable foreseeability by the Seller.

The Consumer Protection Act does not specifically outlaw the use of the "voetstoots" clause and has specifically not invalidated the use of this clause.

We will be closely monitoring property transactions as this evolution is taking place within the marketplace.