Advice and Opinion

Sectional Title Schemes require good property management to run efficiently

Over the past 18 months, the construction of sectional title developments in the northern suburbs of Johannesburg has taken off, with a number of new residential complexes complete and now being occupied. This influx of new sectional title apartments to the market makes good property management an important point for new homeowners to consider carefully.

Chris Renecle, MD of Renprop, points out that while it’s exciting to move into a new apartment that is in good condition and high demand, buyers need to take a long-term view in order to ensure it stays that way. “When a buyer takes occupation or ownership of their new sectional title apartment, the financial affairs and day-to-day running of the complex/estate and maintenance of common property are often very far from their minds as the development is new and in good condition. But, it is in fact the day-to-day management of the sectional scheme and common property which is of paramount importance to the long term appreciation of the sectional title unit,” he says.

New homeowners in sectional title schemes are often not aware of the important functions fulfilled by a property management company. Renecle explains some of the basic roles of a property management company and why they are important:

Budgeting and financial management

Drawing up a proper budget for a sectional title complex and managing the finances well is a critical role of the property management company. Renecle explains that sectional title complexes would ideally want to find themselves in a surplus situation rather than a deficit as the financial standing of the complex plays an important role in the value of the property assets when it comes time for the owners to sell.

This means that the income from the levies needs to cover all expenses that the complex incurs from municipal accounts for water and electricity to security, garden service and maintenance fees among others.

A property management company will assist the trustees of a complex to draw up a sound budget which takes into account all the income and potential expenses. “Good financial planning will help to ensure that the complex/estate has a solid financial base from which to work, thereby limiting the need for special levies,” says Renecle.

“A good property management company should ensure that the budgeted income adequately covers all expenses with enough surplus to build up a reserve fund over and above this for unforeseen expenses,” says Renecle. He explains that this will reduce the impact of additional expenses on owners. He explains that in the event of a big project coming up like repainting the outside walls of a complex, for example, if there is not enough money in the reserve fund to cover the project, homeowners will have to pay a special levy over and above their monthly levy payments to cover the cost of the project.

Over and above drawing up a budget, a property management company will typically handle the collection of levies, the handling of levy arrears as well as the payment of service providers such as garden service and security companies.

A good property management company will make recommendations on repairs and maintenance that require long term financial planning and project management.

“If a complex’s financial affairs are not well managed, the complex will end up in financial trouble and the property owners will be liable for any debt. That is why good financial management is a crucial task of a property management company. This is also one of the many reasons why a reputable company should be hired for this role,” says Renecle.

Estate & facilities management

Another important role of property management companies is estate management. This involves the management and maintenance of complexes and estates to ensure that they are continually in a good state of repair and health enabling the retention of asset value.

A property management company fulfills this role though assisting trustees of a complex to ensure there are good service level agreements in place with the companies that maintain the common property, like the garden service company, as well as the security company and other service providers.

Aside from this, estate management also entails ensuring adherence to the facilities rules by all residents. “All of these tasks add to the smooth running of the overall upkeep and maintenance of a complex to keep it in good condition, thereby ensuring the value of the properties therein is protected,” says Renecle.

Renecle also emphasises good working relationships and notes that property management companies should have regular meetings with the trustees of a complex in order to ensure everything is running as it should. “Each complex is also obliged to hold an Annual General Meeting to keep property owners informed on budget and financial planning issues as well as any other topics that bear relevance to the homeowners. These meetings provide homeowners with the opportunity to engage with the property management company on any issues relating to the budget or maintenance and upkeep of the complex.”

Renecle therefore advises all owners of sectional title property to attend their AGMs in order to ensure that their asset is being properly looked after and managed by the property management company.

Renprop manages and maintains property assets on behalf of institutional and private investors in both the commercial and residential property sectors. Renprop Management is accredited with the EAAB, NAMA, SAPOA and is a registered Financial Services Provider and debt collector subject to the scrutiny and audit of all affiliations.