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Types of home ownership in South Africa

home-sectional-titleThe most common types of properties sold in South Africa are freehold and sectional title but could be a 99 year leasehold or share block. The most common uses of 99 year leases and shareblock are for holiday type properties where there are multiple owners per home or the property is situated in a reserve where the land is leased from a Government body like National parks.

Freehold

Freehold means that you own the land and everything on the land.  The only requirement is that you have to pay rates and taxes to the municipality according to the value of the land and buildings. The ownership papers are in the form of a Title deed.

Sectional title

The properties that fall under this section are usually flats and townhouses where there is common property like a clubhouse, swimming poll and gardens for everyone’s use.  This means that you own only the inside of the house up till the ceiling.  The body corporate (which are made up of all the owners of the individual units), owns everything on the outside of the house as well as the land on which the house is built.  They also own the boundary walls, the roof and all the outbuildings on the land which are referred to as common property.

The body corporate charges the individual section owners the expenses in the form of a levy.  These expenses include municipal rates, the insurance of the building complex, all repairs and maintenance done, communal water and electricity bills as well as accounting fees.  These are just to name a few.   So not only do you have to budget for your home-loan repayments you also have to budget for the monthly levy.  As from July 2008 all sectional title units will be charged separately and you will receive your own account from the local municipality.

Before you decide to buy into the sectional title complex, make sure you get the latest financial statements from the body corporate to make sure that it will be a financially sound investment and that there are no debts to be covered. As an owner in the sectional title scheme you are responsible for a portion of that debt/forthcoming expense. If it has not been adequately catered for a special levy will be needed to cover the expense/debt. Always ask the question “has a special levy ever been imposed and if so, what was it for?”  Also make sure that the house rules being enforced by the body corporate are reasonable and in line with your expectations.

99 Year leasehold

The home owner of this type of home ownership will never own the land.  The land is only leased to the home owner for a period of 99 years.  If you decide to buy the house from and existing owner and the real owner is not government or a municipality, you only buy what is left in years on the lease.  If the land is owned by the government the 99 year lease period will begin afresh with every new change of ownership.  The land will remain the property of the municipality or government but often comes with an optional renewal.

Share block

This form of property ownership applies to a small number of blocks of flats/townhouses and was a method of selling property adopted by the Timeshare industry where there are up to 104(weeknd ownership and midweek ownership) owners per unit.  Here the property is registered on the name of a company.  Once you purchase a flat you become a shareholder in the company and are then entitled to occupy a particular unit (flat).  The proof of ownership is then a share certificate instead of a title deed.  As in the case of the sectional title, the expenses of the share block company will be divided among the shareholders.  To make sure that this is a financially sound investment get an accountant to check the latest financial accounts before you decide to buy into a share block.  But be warned that no bank or financial institution will grant a mortgage loan when the property is held through a share block scheme, developers often finance the loans in-house at higher than normal interest rates.

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