Extending a sectional title unit

Although we live in an age of total access to all kinds of information, it would seem that most owners of sectional title unit choose to ignore or are totally ignorant of any process required when they enlarge their sectional title units.

One of the effects of an “unofficial extension” is that if the property is sold, the transaction could be delayed by between 3 to 6 months, causing financial losses or even cancellation of the transaction.

What are the processes involved to ensure that an extension is legal?

1.     Obtain written consent from the body corporate to the extension.

Different body corporates have different requirements. Owners could be asked to supply draft building plans, written consents of neighbours and possibly payment of an application fee.

2.     Instruct an architect or draughtsman to draw building plans

Fees and expenses relating to the drawing of building plans vary greatly from firm to firm and even from area to area. Remember that there is also a plan approval fee payable to the local authority.

3.     Have the plans approved by the local authority

Note that this process could take as long as 6 months and depends on the effectiveness of the local authority.

4.     Construct the improvements

Many owners neglect to enter into a written building agreement with a builder.  There are many free samples of building contracts available on the web and owners would be well advised to have one completed and signed.

Keep it in mind that the one golden rule of dealing with building contractors is that you  should always owe the contractor money – not vice versa!

5.     Have the improvements inspected by a building inspector of the local authority

Please read elsewhere in this blog the article about building plan approval and the inspection thereof.

6.     Appoint a land survey or architect to draw sectional title plans of extension

In terms of the Sectional Titles Act, a land surveyor or architect must draw the sectional plans of extension. He/she will lodge it for approval at the Surveyor General’s office and the cost will vary according to the complexity of the task. The costs & fees may vary between R8 000 and R25 000.

Note that the approval process may be expedited but generally takes about 6 weeks.

7.     Instruct a conveyancer to register the extension in the Deeds Office

This is may be done simultaneously with the transfer of the property and the cost is approximately R2 500.

Determining fair value of a home

Sellers (and some estate agents) are often faced with a conundrum when sellers decide to sell: How to determine fair value in the present market.

During the property boom, this was really a difficult task. Values increased so rapidly that even the experienced professionals could not do it. The one positive result of the recession is that prices have rationalized.

So how do you determine fair value? Most estate agents have access to various web-based systems such as SAPTG and Lightstone which can assist. These systems, which are not always as accurate as one could wish for, simply attempt to compare similar properties recently sold with the property about to be sold. However, is South Africa we have very limited data available about size and features of homes. Therefore the data offered by these portals have a lot to be desired. 

Despite this, most commercial banks rely heavily on data supplied by the likes of Lightstone to determine risk and will often refuse to do a real valuation by a real person unless the purchase price is close to the value indicated by a portal.

This is even truer with sectional title complex units. No matter how much the unit has been improved, most banks will simply determine the average value per square metre in a complex and simply grant bonds at this rate. Owners of sectional title units are therefore well advised to guard against over capitalizing.

The bottom line still is that the value of a property is the price that a willing and able purchaser is prepared to pay at a given date. Unless a seller is actively involved in the property market, it would therefore always be advisable to obtain the assistance of an experienced estate agent who is successful in the area within the property is situated, to assist with determining value.

The inserted diagram indicates the importance of determining the correct value of a property and to enter the market at the correct price. The more urgent the sale, the more important it is to get this right - first time.

Whatever happened to Voetstoots?

The term Voetstoots, a legal animal inherited by us from the Dutch, has never been more contentious than right now. After the Consumer Protection Act (“CPA”) came into effect and with the broadcast on an insert on Carte Blance about a badly defective house (and the trouble it caused for its new owners), many people seem to think that Voetstoots has disappeared from our property horizon. In my opinion (and that of 99% of all lawyers in South Africa), this is not the case.

Voetstoots simply means that a purchaser buys an immovable property as it lies-warts and all. The seller is protected against any legal claims by the purchaser after transfer related to any patent (clearly visible/easily ascertainable) defects and latent defects in the property that he was not aware of. A problem which aggrieved purchasers often face, is to prove that a seller knew of latent defects. I was once involved in a case where the roof started leaking like a sieve once the rains came in October. When we inspected the roof, it was found that under every hole in the roof, the owner had placed a container to catch rain. Proof was a walk in the park!

Has Voetstoots been removed from our legal system by the CPA?

·         New properties purchased from developers or sellers who sell property in the ordinary course of their business: YES - the CPA is applicable and purchasers are afforded protection in terms of the CPA

·         Secondhand properties privately purchased: NO. If the Voetstoots (or a similar) clause is inserted in the deed of sale, Voetstoots  is applicable

·         Secondhand properties purchased with the assistance of an estate agent: NO. The arguments to justify this are that the CPA is not applicable to professions which are governed by their own acts of parliament (such as attorneys, medical professionals and estate agents) and that estate agents are simply go-betweens between sellers and purchasers and that the only parties to the sale of property are them. It goes without saying that the Voetstoots (or a similar) clause must be inserted in the deed of sale.

However, the jury is still out on this issue. Until the matter is decided in court, the above is simply an opinion.

Buying a retirement unit

Most of us fail to properly plan for our retirements. Then one day, we realize that our currents homes are no longer suitable and then start looking in a panicked state for something suitable to buy. Start planning today and hopefully this article may assist you with your decisions.

There are two types of retirement ownership.

Usually the cheaper option if to purchase the “life right” in a unit. This is not ownership and the right to occupy lapses on the death of the purchaser. This option merely enables a person to occupy a property during his/her lifetime and cannot be bequeathed to heirs.

The second type is traditional property ownership (either sectional- or full title). Obviously these units are more expensive, but are much more sought-after. Ownership does not lapse on the death of the owner and have in the recent past proofed to be excellent investment opportunities.

Issues to consider when choosing a a retirement unit:

• Will you be able to raise a loan?

Generally speaking, once you reach sixty years of age, it becomes more difficult to raise a bank loan and if a loan is granted, the repayment term is usually significantly reduced to 10 years or less. Cash therefore is king and saving well in advance is advisable.

• Position Position Position

As with any other property, position is of tantamount importance. Is the property easily accessible, is it close to hospitals, shopping centres etc

• Amenities such a frail care unit, sport facilities

The more useful and senior-friendly facilities a retirement complex has, the more demand is created for it which increases price.

• Financial well-being of the body corporate

As for certified copies of the latest financial statements and if necessary, let an accountant have a look at them.  A well-managed complex will have sound financial statements.

• Running costs

Determine what the monthly levy is and how often and with what percentage it is increased. Also find out what the municipal rates are and what the average consumption charges are.

• Security

Some retirement complexes are simply safer than others. Do your homework and buy in a safe environment.

Approved building plans - ARE THEY REALLY NEEDED?

It is alarming to realize how casual home owners have become about adding onto their homes without having the additions approved by the relevant local authority. Presumably this is as a result of less that acceptable levels of service delivery by local councils and a general lackadaisical disregard for rules and regulations in this country. 

In terms of the National Building Regulations, all additions to any building have to appear on a building plan approved by the local authority. If this is not the case, a home owner risks the possibility of being forced to demolish any unapproved building or addition.

When granting bonds to purchasers, banks are increasingly insisting upon receipt of copies of approved building plans prior to bond registration. If these are not available, it could delay the transfer date with 4 to 6 months.

It is also advisable to obtain an occupation certificate issued by the Council relating to all building on a property. This confirms that the buildings, indicated on approved building plans, were inspected by a proper building inspector.

My firm was recently involved with a transfer of a property in a small security estate. The seller purchased the property direct from the developer in 2006 and there were a few title conditions which were required to be removed with the written consent of the local authority.

The Council was prepared to grant the required consent (without which transfer could not be registered) on condition that original approved building plans and an occupation certificate were supplied.

Now as luck would have it, the developer immigrated to Canada a few years ago and could not be traced.

The end result was that the seller had to appoint a firm of architects and town planners to obtain the plans and certificate at considerable cost to him. The transfer was delayed by about six weeks.

Advice to purchasers and estate agents: Insist upon the inclusion in an Offer to Purchase of a clause which ensures that both the approved building plans and an occupation certificate be supplied prior to transfer. 

Arrear bond repayments - a few survival tips

Many people think that the time of distressed property sales is over. 

This is incorrect. In fact, many families have over the part few years managed to live off their savings which have now been depleted. If your family or someone that you know, is unable to keep-up with bond installments, the worst thing to do is to ignore the problem. 

Face the music  and consider doing one or a few of the following:

· All of our major banks have distressed property programs. It is not in their interest to attach and own property. Make an appointment and consult with the appropriate person. The bank may sometimes prolong the term of the bond or assist home owners by writing-off some interest and introducing him to a ‘distressed sales program”.

· Give you fullest cooperation to the bank and the estate agents that it will appoint to sell the property. Ensure that you are available when the property is valued and when potential purchasers view it.

· If you foresee trouble, but are not yet in arrears with installments, consider selling and appoint estate agents as soon as possible. Read the above inset about sole mandates. Note that many estate agencies nowadays specialize in distressed sales.

· If you are fortunate enough to have family with means, approach them for a loan. Ensure that you have a back-up plan in the event that you cannot repay the loan. Nothing spoils a relationship as unpaid debt!

REMEMBER: You are not unique and millions of people have gone through the same trauma.

Sole mandates - friend or foe of a seller?

Recently, Ronald Ennik (ex Pam Golding and now with his own real estate company) made some sweeping statements in the Financial Mail about the ills of granting a sole mandate to an estate agent. To read the article please click: http://www.fm.co.za/fm/2012/07/18/a-chilling-clause 

It is a fact, that a sole mandate (if given for the right reasons) is possibly the best way to ensure that a realistically-priced property is sold as soon as possible.

Here are some advantages of granting a sole mandate:

· Security of the property and its inhabitants is maintained

· The seller only deals with one estate agent

· It ensures that a double commission claim can never be instituted

· The estate agent really focuses on the marketing - a successful sale means that the sole mandate is like a post-dated cheque to him/her

· The property is seen by the public as “exclusive” and the danger of over-exposure is eliminated

· The percentage commission is agreed upon prior to the sale and the agent negotiates a price as high as the market allows

Most sellers argue that if the sale is urgent, as many as possible estate agents should be instructed to market the property. It is suggested that this is wrong. Nothing screams of desperation as a few “for sale” signs at a property and deemed desperation usually results in a much reduced price.

Who should you appoint as a sole agent?

· Determine which individual agent is the most successful in your area. Drive around and look for “Sold” boards. However, since security issues exist in many suburbs, seller often do not allow these boards anymore.

· Visit the major property websites  (Property 24, Private Property etc) and search for a property similar to yours in the area. Within a matter of minutes you will be able to determine who the “mover & shaker” agents are. Prepare a shortlist of the best performers.

· Invite the agents on the shortlist to do an evaluation and sole market presentation. Choose the most impressive one.

· Ask around - clients who had good experiences with estate agents are often more than willing to refer them.

· Try and stick to agents employed the well-known brands. They usually employ the most professional agents, maintain and are proud of quality service delivery and constantly train their agents.