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Louise Martin, CEO of Estate Living, aptly states: ‘Living in a community scheme can foster a sense of belonging and shared responsibility, enhancing the quality of life for all residents.’
1. What is a community scheme?
The cornerstone of community schemes or estates is security. As the demand for housing has grown over the last few decades, so has the crime rate. Investors looking for both physical and financial security have found this in community schemes. Community schemes have emerged as a popular and practical solution. With approximately 82,000 developments comprising bodies corporate and homeowners associations, this lifestyle choice offers a range of solutions within different affordability ranges but also shared amenities, good locations and, most importantly, security solutions like access control, electric fencing, and CCTV cameras. Louise Martin, CEO of Estate Living, aptly states: ‘Living in a community scheme can foster a sense of belonging and shared responsibility, enhancing the quality of life for all residents.’
2. Where does Estate Living fit into the mix?
Community schemes encompass a lifestyle where individuals share common interests and enjoy shared facilities like play parks and swimming pools, which would be costly to maintain individually. However, this lifestyle also requires certain commitments that differ from traditional home ownership. For instance, in a sectional title development, decision-making on shared responsibilities involves input from all members.
New owners often face uncertainty about their rights and responsibilities in a community scheme development. To address this, the article below will break down the ins and outs of community schemes or estate living.
Estate Living is a resource that provides valuable insights into community living and the rights and responsibilities of investors in these communities. The Estate Living platform works closely with various experts across the industry, including the Community Schemes Ombud Service (CSOS) and legal entities, as well as renewable energy, utility management and a host of associations. Estate Living is designed to inform investors in order to help them make the best possible decisions regardless of where they are in the property value chain.
3. What is a community scheme?
A community scheme, as defined by the Community Schemes Ombud Service Act of 2011, is any arrangement where parts of land and buildings are shared and members are jointly responsible. Examples of community schemes include:
• Sectional title developments
• Homeowners association developments
• Mixed-use developments
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These developments consist of individually owned units and shared common property. Understanding your rights and responsibilities as an owner, not only for your property but also for shared areas, is crucial.
Typical common property areas include:
• Swimming pools
• Playgrounds
• Gyms
• Tennis, padel, and/or squash courts
• Stairways
• Roadways
• Parking bays
• Communal lifts
• Communal gardens and pathways
4. What is a body corporate?
The term ‘body corporate’ refers to the collective group of owners within a scheme. A body corporate is formed when the first unit is sold and transferred by the developer. It is a legal entity that can engage in legal actions and must comply with various regulations, including those of the Sectional Titles Schemes Management Act (STSMA), the Prescribed Management Rule (PMR), the Community Schemes Ombud Service Act, and council by-laws.
5. The role of a body corporate
At the annual general meeting (AGM), owners or their representatives decide on crucial matters such as:
• Conduct rules of the scheme
• Management of the scheme
• Maintenance of common property
• Insurance
• Budget approval
Before buying into a body corporate, ensure that there are no outstanding fees, as new owners will be required to cover these costs.
6. Homeowners associations (HOAs)
In an HOA, an owner holds a registered title deed to a property, responsible for its maintenance. The HOA maintains common areas and operates under the Companies Act, holding an AGM to discuss and vote on important matters.
7. Committee responsibilities
At the AGM, members elect a committee to manage the scheme’s day-to-day operations, including:
• Ensuring that levies are up to date
• Enforcing complex rules
• Approving budgets
• Working with managing agents and estate managers
• Ensuring adequate insurance
• Approving maintenance projects
Committee members must act honestly, in good faith, and avoid conflicts of interest, fulfilling their fiduciary duties to the scheme.
8. Maintenance of common property
Maintenance responsibilities vary, but generally, the scheme must maintain common property per the Sectional Titles Schemes Management Act 8 of 2011. A 10-year maintenance plan is often required for major capital maintenance. Professional services are sourced for maintenance, and in some cases a special general meeting may be needed for significant decisions.
9. Annual general meetings (AGMs)
AGMs are yearly meetings of owners or shareholders, requiring a notice period (14 days for bodies corporate and usually 21 days for HOAs). AGMs address financial positions, budget approval, the appointment of auditors, insurance, and committee elections.
Special general meetings (SGMs) may be called for urgent matters requiring member votes.
10. Costs to community members
Community members pay levies to cover the scheme’s financial obligations, including insurance, upkeep of common property, garden and cleaning services, pool maintenance, management services, employee expenses, legal costs, security services, and more. Non-payment of levies can result in serious consequences, including legal action and possible auctioning of the property.
11. The investment value of community schemes
Investing in a community scheme can be a lucrative opportunity. Here’s why:
1. Stable income stream: Rental properties in community schemes often command higher rents due to the added amenities and security, providing a stable and attractive income stream for investors.
2. Capital appreciation: Properties in well-maintained and managed community schemes tend to appreciate faster than stand-alone properties. The shared maintenance and management ensure that the property remains in good condition, enhancing its market value.
3. Demand and desirability: There is a growing demand for properties in community schemes due to the lifestyle benefits they offer, such as security, shared amenities, and a sense of community. This demand can lead to quicker sales and potentially higher selling prices.
4. Reduced maintenance costs: The shared responsibility for common areas means that individual owners often face lower maintenance costs for their properties, which can be a significant advantage for investors looking to maximize their returns.
5. Enhanced security: Community schemes typically offer better security features, such as controlled access and surveillance, making them attractive to buyers and tenants seeking a safe living environment.
13. Investing in community schemes
As an investor in a community scheme, your rights and responsibilities remain the same as if you were living in the property. Property maintenance, levies, and associated costs are still your responsibility. Ensuring correct contact details for both you the owner and for the tenants is essential for proper communication. When letting units, tenants must complete a resident form for access control and emergency records, and sign a copy of the community rules verifying that they understand the rules, will comply to the rules and will be held accountable should they incur any penalties.
14. Conduct rules
Conduct rules outline the duties and responsibilities of owners/residents, setting the tone for harmonious living. These rules should be registered and approved by CSOS. Owners and potential buyers must familiarise themselves with these rules to understand permissible actions within the scheme. This includes, but not limited to, architectural guidelines, pets, parking, maintenance, potential penalties, rules on proxies and conflict resolution.
15. Making informed decisions
Before buying into a community scheme, gather as much information as possible about the scheme’s financial stability, future developments, and any existing debts. Ensure that any exterior improvements have committee approval, and keep relevant documents like sectional plans and zoning certificates on hand.
16. New owner or tenant consider the following
As a new owner or tenant
• Ensure that the property practitioners assisting you purchase or rent the property has accurate information about the development
• That you receive a welcome pack with important details such as the rules
• That you are in possess all relevant documents relating to the scheme, for a new owner that includes a copy of the last AGM with financial statements.
Investing in community schemes not only provides a valuable lifestyle but also presents an excellent investment opportunity, offering stability, capital appreciation, and reduced maintenance costs. As Louise Martin notes: ‘Investing in community living is not just about buying property; it’s about investing in a lifestyle that promises growth, security, and a sense of community. By understanding your rights and obligations, you can make informed decisions and enjoy the benefits of living in a community scheme’
