Maintenance Rules for Sectional Titles Will Boost Property Values

The requirements now necessary with regards to sectional title maintenance of major capital items in terms of the Sectional Title Schemes Management Act ( STSMA) are there to create a more formalised and long-term view with regards to maintenance.

This, in turn, will create a need for better budgeting and financial management, says Michael Bauer, general manager of property management company IHFM.

There are two provisions in the STSMA regulation 2 and annexure 1 of the new prescribed management rules.

Regulation 2 provides for a reserve fund to be established solely for maintenance of major capital items and the amounts to be in reserve.

"Many will attest to the fact that well-maintained buildings create better first impressions and growing property values. The financial protection offered through a well-managed scheme will create a demand for units for sale and the cycle of increased prices and demand perpetuates," he says.

The first new requirement in terms of the new legislation is that all sectional title schemes must have a 10-year maintenance plan which must be presented at the annual general meeting.

The act doesn't specify the format for this documentation, but it should include all major maintenance items, such as electrical installations, plumbing, glazing, waterproofing and perimeter fencing, and the costs of repairing, replacing or maintenance of any of these items over the coming 10-year period should also be listed.

"The problem with no prescribed form for the maintenance plan is that some might not list the necessary details required, and miss an important part or aspect of the plan," says Bauer.

"The maintenance of any of the common property for the previous year, the current year and the following year should also be presented. With the specific information required, all the projects will be clearly defined."

He says larger sectional title schemes may need to employ a professional to survey the premises and compile the 10-year maintenance plan, as this is something that the layperson might not be able to carry out with the necessary detail.

The second requirement for regular maintenance is the provision for a reserve fund to be established, which goes hand in hand with the 10-year maintenance plan. This is listed in the regulations of the STSMA and annexure 1 of the prescribed management rules.

The suggested amount is to have 25 percent of the scheme's annual levy budget in reserve at all times. If it needs topping up from year to year, this should be done, and it is not necessary to pay in 25 percent of the levy budget each year.

The reserve fund should be in a separate account and separate financial records should be kept for this.

Article courtesy of The Weekend Argus