Good governance is key to protect investment in sectional title property

© Stephen Griffith – 123RF.com

“In the fourth quarter of 2015, 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 had shown mildly stronger growth than that of the Full Title Index,” Loos said.

Willem le Roux, director of Propell sectional title finance management company, says with the increase in sectional title popularity, 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 one’s investment.

"With the costs 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 in order for them to maintain value and grow in capital value for their owners," Le Roux cautions.

Financial management

"The basics of good financial management in sectional title schemes starts with the owners themselves, 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.

"The appointment 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," Le Roux says.

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

Debt collection

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 communicate openly and regularly with 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, gates in proper working order, etc. An attractive physical appearance makes the complex popular amongst people wanting to buy or rent, and ultimately supports growing property values,” concludes Le Roux.