Sectional title properties are mostly complexes with a Body Corporate and/or Managing Agents that handle the financial and day to day administration.
The bank will want to know that the Body Corporate of the complex is solvent and the levies, maintenance and general upkeep of the complex as a whole is being managed correctly, before considering financing a property within it. We have had cases where a home loan application is declined, not because of the client, but because the financials of the complex is unsatisfactory due to unpaid levies, mal-administration or similar issues. Some banks will also limit the exposure they have with regards to the number of units they want to finance within a certain complex. For example, bank A would ideally not want to finance more than 30% of properties in a complex, but would prefer banks B, C & D to have a similar share in properties financed in the same complex as this spreads the risk for all of them. This is similar to a New Development (a topic we will discuss next week) from that perspective.
Be sure to request the latest signed (audited) financials of the complex if you are considering buying a Sectional Title Property and find out from the Managing Agents whether there are any concerns you should be aware of.
Find out when the last major maintenance project was completed so that you are not caught with a nasty special levies surprise shortly after you have bought and incurred the normal costs associated with a property purchase.
Sectional Title Property ownership brings with it many positives like added security, general areas maintenance of communal swimming pools, gardens, etc and that community life feel, but it could also have negatives which should be investigated before investing your hard earned income in a property.
Yours in Home Loans…