What is a Subprime Loan ?
Subprime loans are housing loans made by lenders to individuals with poor credit histories and are therefore risky. What has happened in the U.S.A. is that properties have dropped in value so much that the debt is greater than the value of the property.
What is the 80/20 rule ?
The 80/20 Rule is one of the most helpful of all concepts of time and life management. It is also called the Pareto Principle after its founder, the Italian economist Vilfredo Pareto, who first wrote about it in 1895. Pareto noticed that people in his society seemed to divide naturally into what he called the "vital few," the top 20% in terms of money and influence, and the "trivial many," the bottom 80%.
He later discovered that virtually all economic activity was subject to this Pareto Principle as well.
For example, this rule says that 20% of your activities will account for 80% of your results. 20% of your customers will account for 80% of your sales. 20% of your products or services will account for 80% of your profits. 20% of your tasks will account for 80% of the value of what you do, and so on.
What is the purpose of The National Credit Act ?
It is to curb reckless lending, over-indebtness and unfair lending practices. It also establishes more rights for people buying on credit.
Can I buy a property with no money ?
Yes you can. If your finances are in order and you have a good credit rating the banks will give you a 108% bond which will cover the purchase price and fees on your first property.
What is passive income ?
This is income you do not have to work for. If you buy a property as an investment - the rental you receive from your tenant is "Passive Income".
How can I find out what properties have been sold for in the past ?
Ask the Estate Agent for a S A P T G (South African Property Transfer Guide) or click on S P I - right hand side of this page. You can buy a report with your credit card. These reports will give you the information you require.
How do I do a credit check on a Tenant ?
Look at right hand side of this page and click on T P N(Tenant Profile Network) - follow link.
What is shareblock ?
This is where purchasers own shares in a company that owns a whole block of units rather than any tangible property.
What is sectional title ?
A sectional title development scheme provides for separate ownership of a property, by individuals. The title is registered in the purchasers name.
What does an owner own ?
In buying into a scheme a purchaser will acquire a section (or sections), and an undivided share of the common property. These are collectively known as a unit. In practical terms, a section is usually a flat or townhouse, but may also be a garage, domestic staff room, parking bay or external storeroom. Pelase note that in many schemes, the garage and external rooms may not be sections, but may be part of the common property of which the owner has exclusive use. Trafalgar
What is common property ?
The common property is that part of a scheme which does not form part of any section. Driveways, gardens, swiming pools, corridors, lifts and entrance foyers are good examples of common property. As mentioned above, some parts of the common property are designated as exclusive use areas. Trafalgar
What is exclusive use ?
Often this will be a garden or patio attached to a section, in which case the owner will not own the garden or patio, but will have exclusive use of those areas for as long as he is an owner in the scheme. A balcony attached to a flat is sometimes designated as an exclusive use area, although in most cases, the balcony forms part of the section. The 1986 Act allows an owner to sell the exclusive use of an area to any other owner in the scheme, but not to an outsider. The practical implication is that owners who have exclusive use of a garage, storeroom or parking bay which they do not require can sell the exclusive use to another owner in the scheme. This benefit does not apply to owners of units registered under the 1971 Act, as under that Act, exclusive use areas were allocated under the rules of the scheme, whereas under the 1986 Act they are registered at the deeds office. Trafalgar
Who controls the common property ?
The common property is controlled by the body corporate. There are no exceptions to this rule. The practical implication of this is that even though parts of the common property are designated exclusive use areas, these areas are still controlled by the body corporate and are therefore subject to the rules of the scheme. These rules might prohibit "braaing" in an exclusive use garden or balcony, control the type of fence or wall erected around a garden, or prevent the installation of a plunge pool or spa bath without the consent of the other memebers of the trustees or body corporate. Trafalgar
What is the body corporate ?
The body corporate is the collective name given to all the owners of units in a scheme. It comes into existence as soon as the developer of the scheme transfers the first unit to a new owner. All registered owners of units in a scheme are members of the body corporate. The body corporate controls and manages the scheme. Day-to-day adminstration of the scheme is vested in trustees who are elected by the owners. Major decisions regarding the scheme are made by the body corporate, usually at the annual general meeting (AGM), or at a special general meeting. At these meetings, matters which affect the sceheme are discussed. Budgets are approved, rules can be changed and trustees are elected.
Each member of a body corporate is entitled to vote at these meetings, providing that the member is not in arrears with levy payments or in a serious breach of the rules. Members in default can only vote in certain circumstances. Unless otherwise determined by the developer at the time the register was opened, or subsequently by the body corporate by means of a sepcial general meeting, an individual member's voting power is governed by the member's percentage ownership of the entire scheme. This percentage is known as the participation quota. Trafalgar
Who are the trustees ?
The trustees are usually owners in a scheme who have been entrusted with the task of managing the scheme on a day-to-day basis. Trustees are elected by the body corporate at an AGM. The minimum number of trustees for a scheme is two. The Act does not specify the maximum number. Ideally, a trustee should possess skills or qualities which will be of benefit to the scheme. Accounting or legal knowledge, organisation abilities, knowledge of electrical or mechanical matters, the ability to type or bookkeeping skills are much in demand, and can save the body corprate a lot of time and expense. It is permissible to appoint a trustee who does not own a unit in the scheme, although this is not common practice. At all times, the majority of trustees must be owners or the spouses of owners of units in the scheme. Trustees work on a voluntary, unpaid basis, although in special circumstances the body corporate may, by special resolution, agree to remunerate a trustee.
A trustee who is not an owner may be paid for acting as a trustee. All trustees are, of course, entitled to be reimbursed for all legitimate costs incurred by them in execution of their duties. At the first meeting of the trustees after being appointed, the trustees elect a chairman who usually holds office unit the next AGM. Trafalgar
Who makes the rules ?
At the inception of a scheme, management and conduct rules are established. These rules from annexure 8 and 9 to section 35 of the 1986 sectional titles act. As their names imply, the management rules control the management of the scheme, while the conduct rules lay down guildelines for the conduct of owners and their guests or tenants. Where a scheme was established under the 1971 act, the rules were made in accordance with the provisions of that act, those rules were automatically replaced by the management and conduct rules of the new act. In cases where these rules were amended, the 1986 act specifies certain actions which had to be taken to adopt those changes to make them applicable to the 1986 act. An excellent and detailed discussion regarding rules will be found in "The Sectional Title Handbook", by Graham Paddock and published by Juta. Trafalgar
Can these rules be changed ?
Yes. The body corporate can change the rules, providing that these changes are not against the intentions or spirit of the sectional titles act. The procedure which must be followed before rules can be changed is clearly defined in the act. Proposed changes must be put to owners of the body corporate at a general meeting, at which owners will be able to discuss the proposed changes before being asked to vote for or against the changes. The management rule changes require a unanimous resolution, while conduct rules require a special resolution. Trafalgar
What is the levy ?
The costs incurred in managing a scheme have to be paid by the body corporate. These costs include:
- Rates and taxes
- Insurance premiums for the common property
- Repairs and maintenance of the common property
- Wages and salaries fo the cleaners and other staff
- Water and electricity used on the common property
These costs are paid by individual owners in the form of a monthly levy, calculated in accordance with the participation quota for their unit, unless the developer at the time of opening the register, or the body corporate by means of a special resolution, allocated a different value to a particular unit. Some costs incurred in the upkeep of exclusive use areas can be recovered from the user of that area. In addition to the above, the body corporate is obliged to establish a fund for future maintenance and unexpected expenses. The size of this fund is not specified in the Act, but a wise body corporate will make sure that the fund is adequate for the size of the scheme and the present condition of the property. If the fund becomes excessively large, the Act does not allow any part of the excess to be refunded. However, the excess could be used to subsidise future levies or to improve the common property. Trafalgar
How is the levy is calculated ?
At the inception of a scheme and again before every AGM, the trustees have to prepare a budget for the following year. This budget is then presented to all members of the body corprate at the AGM. The body corporate can either accept the budget or can ask for changes to be made. Once the budget has been accepted, the total annual cost is divided into a monthly amount. Each owner is then "levied" a monthly amount, which is his or her share of the common property. The amount levied is calculated in accordance with the participation quote of the owners unit. Larger units have a higher participation quota than smaller units and the amount paid by each owner will vary accordingly. Trafalgar
Can the levy be changed at other times ?
Yes. When necessary, the trustees can impose a special levy to cover expenses of an unforeseen nature. Trafalgar
What is a managing agent ?
Managing and administering a scheme, particularly a large scheme, is complicated and time consuming. Occasionally, the body corporate and trustees undertake the entire task. Unless the body corporate is usually well endowed with specialised knowledge and talents, this is seldom successful. Most body corporates decide to appoint a managing agent, usually a company or close corporation which specialises in this aspect of sectional title adminstration. The managing agent collects the monthly levies and all other monies due by owners to the body corporate. The agent produces the accounts, recovers unpaid debts, prepares the annual budgets, arranges for quotes for repairs and maintenance, sends out notices and generally assists the trustees with the numerous time-consuming tasks which arise in adminstering a scheme. A good managing agent can save the body corporate a lot of time, trouble and expense. Trafalgar