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In an effort to broaden their appeal and attract different types or ages of homebuyer, many new estate developments these days include one or more Sectional Title (ST) schemes as well as freehold homes.
These schemes generally offer townhouses or apartments that are more affordable for younger buyers or seniors but still give them access to the full range of any sporting, wellness, and community amenities in the estate. But before committing to a purchase, says Andrew Schaefer, MD of leading property management company Trafalgar, prospective buyers should first make sure that they understand the levy requirements in such layered estates.
“Finding out what levies you will pay in such estates, which are run by a Homeowners’ Association (HOA) but have one or more ST schemes inside them that are each run by their own Body Corporate – can be a bit tricky. And things can get even more complicated if each entity has a different managing agent.
“However, the way to untangle things is to refer to the founding Constitution or Memorandum of Incorporation (MOI) of the main or ‘master’ HOA to find out who or what is regarded as a member of that HOA. For example, in a layered estate with a ST complex built on one of the stands in the estate, the Constitution/ MOI may say that the ST Body Corporate as a whole is viewed as a single HOA member.
“But in other instances, the Constitution/ MOI may confer membership on every individual owner in the ST complex, and this will make a big difference to how levies are calculated and who can vote at the HOA meetings.”
Where the Body Corporate is defined as a single member of the HOA, he says, it will only have one vote at HOA meetings and will pay one levy to the HOA on behalf of all the owners in the ST complex, with each ST owner paying a contribution towards that levy in addition to their normal ST monthly levy.
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“In such cases the division of responsibilities will usually also be relatively straightforward, with the HOA taking care of broader estate services such as perimeter and gate security, the internal roads and any lifestyle amenities such as a pool, gym or clubhouse, while the Body Corporate trustees manage the maintenance and upkeep of the ST scheme as well as building insurance and the payment of any specific amounts due to the local authority or other service providers.”
On the other hand, says Schaefer, if the Constitution / MOI defines each individual owner in the ST scheme as a member of the HOA, they will each have a vote at HOA meetings, but will also each be required to pay a separate monthly levy to the HOA in addition to their monthly levy in the ST scheme.
“This could mean a higher total levy amount, but would also mean that owners in the ST scheme had a say in the management of the estate as a whole, which some could regard as important in terms of preserving the value of their investments.
“This is why we advise prospective buyers to always first check what levies are payable to either the HOA or the Body Corporate in a layered estate and what each type of levy covers. This breakdown should be clearly set out in the purchase documents, and buyers should of course also check the financials of both the HOA and the Body Corporate before making a final decision.”
