Your Essential Checklist for Buying a Sectional Title Property & Avoiding Hidden Costs

Buying property is a huge financial commitment; every cent counts when following through on a property investment. Sectional title schemes are a popular choice for cost savings and convenience. 

There has been an uptick in fees. Municipal tariffs have increased by 7 - 13%, and water expenses have risen by 4.5 - 14%. With these price surges, sectional title properties that offer lower purchase prices, shared expenses, and better security position themselves as a better option. 

Flats, townhouses, and complexes are in demand because of their lock-up-and-go living, which appeals to remote workers, frequent travellers, commutors, and people living alone. 

However, this bargain can quickly become a burden if you don’t account for hidden costs and manage your finances poorly. 

Hidden Costs Often Overlooked

• There may be levies that rise annually, these fees can spike in times of inflation.
• Major repairs or substantial upgrades can trigger special levies. 
• Shared utility billing may not accurately reflect your usage. 
• Poorly managed schemes can run out of cash for maintenance.

Before you commit to a scheme, do your due diligence and request specific documents. Here’s a checklist to help you ensure you’re buying into a well-run, financially healthy scheme and not falling into a money trap. 

• Body Corporate Financials: Get audited statements and current budgets to review cash flow and financial discipline. 
• Reserve Fund Status: A healthy reserve fund means the scheme can cover major repairs. 
• Maintenance Plan: Check that they have a 10-year maintenance plan in place that is realistic and regularly updated. 
• Levy Schedule: Enquire about the monthly levy amount and how it’s increased in the past three to five years. 
• Utility Measuring System: Ask if water and electricity work on a prepaid system or if there are plans to install prepaid meters. It’s also good to understand how billing works or who will cover installation costs.
• Conduct and Management Rules: Check for fees for breaking restrictions on pets, short-term rentals, noise, and parking. 
• Insurance Cover: Confirm if the building is accurately covered and if it is built into the levies you’re already paying. 

If you spot red flags, you must protect yourself and ensure the deal is worth the risk. You don’t have to walk away, but ensure you’re negotiating and getting the best deal. 

Bottom line, ensure the scheme is financially sound and you’re not signing up for years of rising levies and surprise bills.