A Great Idea: Pre-purchase Reports for Sectional Title Properties
By Jennifer Paddock
As many of you know, I spent a few years living in Australia and working in Strata (Sectional) Title there.
In Australia, when a person is looking to buy a strata property, it’s considered standard procedure for the prospective buyer to obtain a ‘pre-purchase report’. Think of it as a due diligence report. As the name implies, it is a report that the prospective buyer receives before officially buying a property.
In South Africa, no one seems to do this. Quite frankly, with all the issues we hear about from people who have bought into a sectional title scheme without doing their due diligence, I think that needs to change.
These are the types of things that you could expect to learn from a great pre-purchase report:
Factual information about what is actually being bought ie. what parts of the land and buildings will be owned exclusively and what parts are common property owned by all owners in the scheme.
The participation quota allocated to the section you are considering buying (the PQ determines your liability for levies, the weight of your vote and your share of ownership in the common property).
The financial position of the scheme including the total amount in the administration fund, the current ordinary and special levies for the unit in question and whether there are any special levies on the immediate horizon (and if so, what for).
Whether the scheme has a reserve fund and if so, how much it contains to cover major future repair and maintenance items.
The details of all insurance policies held by the body corporate and whether the scheme’s land and buildings are adequately insured.
Information on any significant known building defects such as problems with rising damp, structural issues such as movement in the walls (cracking), safety hazards or a faulty roof.
The date of the last AGM and a copy of the minutes.
A copy of the body corporate rules.
Whether pets are allowed in the scheme.
If the scheme has a managing agent – who the manager is and their contact details.
Why is it important to know this kind of information in advance of buying a sectional title property?
You’ll know in advance the financial position of the scheme and whether there are any special levies on the horizon;
You’ll know in advance what the problems are relating to the body corporate and the land and buildings;
You can use this information to try and negotiate a lower price for the property due to the fact that you may have to pay to repair some of the problems; and
You can get specialist advice about any major problems and how they will affect the property and its value over time.
For buyers to protect themselves financially and also to give themselves (or their tenants) the best chance of a good quality of life within the scheme, I believe pre-purchase reports should become standard procedure in South Africa, as they are in Australia.