Sectional title owners benefitting in South Africa

The recent passage of the Municipality Rates Act will improve South African property market for potential investors.

With the individual rating of sectional title properties around the country, the benefits are likely to extend greatly to sectional title owners.

The sectional title market in South Africa is absolutely enormous, with over 150,000 sectional title properties in existence just within the city of Johannesburg.

Sectional title properties previous to the new legislation being passed had been paid out by the bodies corporate of different groups of properties, with the corporate using the monthly owners’ levies to pay out all of the taxes and rates necessary.

When different sectional title owners fell behind on their monthly levies, the bodies corporate had to take legal action against the owners in order to recover funds while at the same time diverting funds from other areas in order to cover the delinquent monthly amounts. This resulted in poorer maintenance of the titles of people who were diligent in their monthly payments and thus created a situation in which the actions of a few bad apples ruined what was otherwise a perfectly good property investment for the vast majority of people in good financial standing.

The result was a hesitation on the part of prospective buyers and property investors, especially if the particular property they were dealing with was under the purview of a corporate with poor payment records. The addition of poor maintenance further decreased the impulse to buy and resulted in the general decrease of property values as the demand for those properties went down.

In order to fix this problem, the Municipal Rates Act was recently passed. This act allows sectional title properties to be rated individually by the municipalities they are located in and therefore rewards people that remain in good financial standing. This not only rewards those people, but it also eliminates the problems with funding reallocations from the bodies corporate and it also eliminates prospective buyer worry about poor payment records. It will likely do much to increase an already robust and healthy South African housing market.