Jul 12 2019



Tags: sectional title  body corporate  trustees property maintenance 

How To Avoid A Dysfunctional Body Corporate
Sectional Title Row Houses, forming part of the body corporate.

When the body corporate of a sectional title unit becomes dysfunctional, the entire property in general becomes neglected. This is usually caused by a lack of interest of the body corporate members, or simply because nobody wishes to assume the responsibilities of being a trustee.

The result is that the buildings and its grounds are poorly kept and not maintained. In the worst case scenarios, suspension of basic services, such as refuse collection, security and electricity result because of ongoing levee arrears by tenants and other accumulated creditor debts.

This scenario is a property investor's worst nightmare, as the buildings, apartments or complexes become unsightly, run down and even unsafe. This ultimately leads to a declining property market value of the sectional title scheme or even the entire neighborhood.

Read More: What Makes A Good Real Estate Investment?

It is important for property investors and buyers looking to invest in a sectional title scheme, such as townhouse complexes, villas or apartment blocks to inspect and familiarize themselves with the rules of conduct and its management before purchasing. This will hopefully assure the buyer that the scheme is indeed solvent, functional and well managed.

It might also a good idea to know the date of the last Annual General Meeting, it's chairperson and the board of trustees. An example of a poorly functional body corporate could easily be spotted by inspecting the properties interior and exterior in advance for any signs of disrepair and neglect.

Any evidence of neglected maintenance, lack of essential services and poor upkeep of the property are sure tell-tale signs that you should rather be looking elsewhere, even if the property you are interested in happens to be in a prime location. For example, if the body corporate is in arrears with its levy collection, could mean that you will have to subsidize on behalf of others who are behind with their levies.

A dysfunctional body corporate tends to have the following characteristics in common:

* They have poorly maintained grounds and buildings.
* Have buildings that are unsafe or not insurable.
* Have no audited, financial statements available.
* Have very little or no financial reserves.
* Hold irregular meetings, or delayed Annual General Meetings.
* Have owners that are in arrears with their levies and other creditor debts.

For example, the building may have inadequate plumbing, faulty wiring, non-compliant electrical installations, leaking roofs and no general upkeep, such as poor paint jobs or illumination.

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The implications of a dysfunctional body corporate are usually indicative of trustees resigning or the absence of a chairperson, which can have disastrous consequences for the property owners.

In the worst case scenario, when a body corporate becomes insolvent or fails to elect a chairperson and board of trustees, the body corporate would be placed under administration by the management agency. The agency will then appoint an administrator who will assume the role and responsibilities of the chairperson, including all the powers of the body corporate trustees.

This means that the property administrator will have the power and authority to do whatever is necessary to bring the building or sectional title back to a functioning and reputable scheme. Unfortunately, this usually means imposing large increases in levies and other ongoing costs. This then places additional financial strain on the property owners, including those who were diligent in paying their levies all along.

Sectional title owners can steer clear of mismanagement and administration by:

* Appointing an experienced and reputable managing agent.
* Elect an honest, reliable, reputable chairperson and board of trustee members.
* Hold regular general meetings, including AGM meetings to discuss building management.
* Compile an accurate levy budget that accounts for all maintenance and ongoing expenses.
* Ensure an appropriate levy debt collection process is implemented.
* Pay all creditor debts in a timely manner to ensure accounts to not fall into arrears.
* Implement an adequate maintenance plan that shows property owners how the money will be spent and when routine maintenance on the property is expected to be carried out.

Looking to invest in sectional title property?

Related Article: A Buyers Guide to Home Ownership


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