Hey sis!
So you’re eyeing that gorgeous sectional title property? The one with the sparkling pool, manicured gardens, and that security gate that makes you feel safe at night? I get it – sectional title living in South Africa offers so much convenience. But before you sign on that dotted line, let’s have a real heart-to-heart about the actual costs involved. Because smart stewardship isn’t just about what you can afford today – it’s about planning for tomorrow too.
Understanding What You’re Really Buying Into
When you buy sectional title, you’re not just purchasing your unit. You’re joining a community, and with that comes shared financial responsibilities. Body corporates need levy income to cover operating costs like maintenance of common areas, security services, insurance, water and electricity for communal spaces, staff salaries, and management expenses. Think of it as buying shares in a collective investment – except this investment is your home and lifestyle.
Breaking Down the Costs (Because Surprises Aren’t Always Fun)
1. Monthly Levies – Your Non-Negotiable Commitment
Your levy contribution is calculated based on your unit’s participation quota (PQ) – essentially your floor area as a percentage of all units in the scheme. If your unit is 50 square metres and the total scheme is 1,000 square metres, you’ll pay 5% of the body corporate’s budgeted expenses.
Here’s what your levies typically cover:
- Maintenance and repairs of gardens, pools, walkways, and security gates
- Building insurance (not your personal contents – you’ll need separate cover for that!)
- Security services and access control
- Common area utilities like hallway lighting, elevators, and garden irrigation
- Managing agent fees
- Administrative costs
The Reality Check: Levy increases are limited to a maximum of 10% annually to account for increased liabilities, and these increases must be discussed and approved at the Annual General Meeting. Budget for this! If your levy is R2,000 today, it could be R2,200 next year.
2. Special Levies – The Curveball You Need to Prepare For
A special levy is an additional contribution raised for projects, upgrades, or extensive repairs outside normal monthly maintenance requirements. Imagine the roof needs replacing or the complex needs a security upgrade – that’s when special levies come knocking.
Stewardship Tip: When viewing properties, ask for the body corporate’s 10-year maintenance plan and check their reserve fund health. A well-managed scheme with healthy reserves means fewer nasty special levy surprises.
3. Municipal Rates and Your Unit’s Utilities
Now, this is where many first-time sectional title buyers get confused. Let me break it down simply:
In most cases, levies do not include water and electricity costs for individual units – these utilities are typically billed separately and paid directly by the unit owner or tenant. Your setup might be one of these:
- Prepaid meters: You buy electricity/water tokens directly
- Bulk purchase: The body corporate buys utilities in bulk and divides costs among residents (may be in your levy or charged separately)
- Direct municipal billing: You receive your own bill from the municipality
Municipal rates (property taxes) are usually paid by you as the owner, not included in levies. Check your specific scheme’s arrangement before you buy!
For My Investment-Minded Sisters: Rental Property Considerations
Planning to rent out your sectional title? Smart move! But let’s talk about protecting your investment without pricing yourself out of the market.
The Electricity Dilemma
Landlords remain ultimately responsible for utility payment even if tenants don’t pay, and some municipalities like eThekwini no longer allow tenants to operate accounts in their own names. This can create serious financial exposure.
The Prepaid Solution:
Prepaid electricity and water meters enable tenants to monitor usage and manage budgets, while eliminating the landlord’s risk of being stuck with massive utility bills. Here’s why this is brilliant:
- Tenants pay upfront – no surprise R30,000 electricity bills when they move out
- Budget-friendly for tenants – they control their spending and can track usage
- No disconnection disputes – landlords may not legally disconnect municipal services without a court order, but with prepaid, the system is automatic and legal
- Better cash flow – prepaid meters mean utilities are paid upfront before the municipal bill arrives, effectively eliminating the risk of service termination
The Numbers: Sub-metering installation can cost from R680 to R1,280 per unit. Yes, it’s an upfront cost, but compare that to months of legal fees and unpaid utility bills. It’s wise stewardship, sis.
Setting Fair Rental Prices
Here’s how to structure your rental without being “that landlord”:
Base Rent Calculation:
- Your bond repayment
- Your monthly levy contribution
- Municipal rates
- Anticipated vacancy periods (budget for at least one month per year)
- Maintenance reserve (10% of rental income is wise)
- Property insurance
- Managing agent fees (if applicable)
Utilities Structure Options:
- All-inclusive: Add estimated monthly utilities to rent (but be warned: if tenant usage is excessive or municipalities impose penalties, you absorb these costs with no direct control)
- Separate billing with prepaid meters: Charge base rent only, tenants manage their own prepaid electricity/water (my recommendation!)
- Usage-based billing: Tenant pays actual consumption (administratively demanding unless you have systems in place)
Market Reality Check: Research comparable rentals in your complex. If similar units rent for R8,000 and your costs work out to R9,000, you need to reconsider your investment strategy – not charge exorbitant rent. Remember, if levies increase, your lease should include a clause allowing rent adjustment with 30 to 60 days’ notice to tenants.
Practical Stewardship Tips from My Heart to Yours
Before You Buy:
- Request three years of financial statements – look for consistent levy collection and healthy reserves
- Check the levy arrears list – a scheme with many non-paying owners is a red flag
- Review the conduct rules – some schemes have strict rental restrictions
- Attend a trustee meeting if possible – get the vibe of how well the scheme is managed
As an Owner:
- Attend AGMs – owners should make it a habit to attend AGMs or review meeting minutes thoroughly to stay informed about levy increases and budget decisions
- Build your own reserve fund – save separately for special levies
- Get involved – consider serving as a trustee to understand finances better
- Pay on time, every time – when members don’t pay levies, it disrupts the scheme’s financial health, and legal fees can be added to your levy statement
As a Landlord:
- Install prepaid meters – protect yourself and make life easier for tenants
- Keep detailed records – document everything related to utilities and maintenance
- Maintain open communication – inform tenants of levy increases promptly
- Don’t cut corners – illegal actions like disconnecting electricity can cost you more in legal fees
- Screen thoroughly – good tenants are worth their weight in gold
The Bottom Line (Because I Love You and Want You to Succeed)
Sectional title ownership can be an incredible investment and lifestyle choice, but only if you go in with eyes wide open. The monthly costs extend far beyond your bond repayment. Between levies, utilities, rates, and potential special levies, you need breathing room in your budget.
For investment properties, prepaid meters aren’t just convenient – they’re essential stewardship tools that protect your asset while providing fair, transparent billing for tenants. Yes, there’s an installation cost, but it’s a one-time investment that saves you ongoing stress and potential legal nightmares.
Your Action Plan
Before making that offer:
- Calculate total monthly costs: Bond + levies + rates + insurance + utilities
- Add 20% buffer: For the unexpected (because life happens)
- For investors: Factor in vacancy, maintenance reserves, and prepaid meter installation
- Review financials: Request and actually read those body corporate statements
- Ask hard questions: About pending special levies, maintenance plans, and scheme finances
Remember, sis, financial wisdom isn’t about what you can afford in theory – it’s about what you can comfortably manage while still sleeping peacefully at night. Sectional title living offers amazing benefits, but it requires commitment to shared financial responsibility.
Be the owner who pays on time, gets involved, and manages wisely. Your future self will thank you.
With love and wisdom,
Your sisters at Elevate Finance Partners
At Elevate Finance Partners, we believe in empowering you with knowledge for wise financial decisions. Whether you’re a first-time buyer or seasoned investor, we’re here to walk alongside you on your property journey. Need personalised guidance? Let’s chat!