Sectional Title versus Freehold Ownership

Whether you’re becoming a first-time homeowner or are relocating to a new residential property, buying a house is a major decision. As you progress from browsing homes to shortlisting ones you’re interested in, you’ll notice that properties often are available with sectional title or freehold ownership. As either ownership option can offer you unique benefits, here's what you should know about each one in order to choose what best suits your needs.

What’s a sectional title property? 

If you're interested in communal living and want to buy a flat or apartment in an estate or complex, you can become an owner of a property in a sectional title scheme. This type of ownership is governed by unique laws created by a body corporate, giving you certain rights and responsibilities.

When you become a sectional title property owner, you become the legal owner of a section or unit of a shared building or block. Depending on your personal property’s size and offerings, you could also become an exclusive-use owner of private amenities like a pool or garden. All sectional title property owners become part owners of their complex or estate communal areas. This can include its gardens, driveways, recreational facilities, lifts and corridors.

Buying a sectional title property automatically makes you a member of the estate or complex body corporate. This is a legal entity that manages the building's financial, administrative and physical requirements and oversees how they’re met. The body corporate also creates and enforces rules that sectional title scheme residents must abide by.

What’s a freehold property? 

Freehold properties are detached homes or buildings that sit on a private section of land. When you become an owner of a freehold property, you gain ownership of the land it's built on and any structures built on it. As you retain complete ownership of the property, you have the authority to make changes to it. However, you’ll still be subject to the municipal laws governing your area.

If anything on your freehold property requires repair or replacement, the responsibility will fall on you as the property owner. This means you’re also responsible for maintaining the property by mowing your lawn, cleaning your gutters and keeping your pool chlorinated.

You can purchase a freehold property in a neighborhood of your choosing, but it might not come with the same access to communal living or shared recreational facilities that a sectional title scheme can offer. While you’re entitled to do what you wish with your freehold property (as long as you secure prior municipal by-law approval) your renovation or construction work can impact your neighbors and the value of their homes.

Key differences between freehold properties and sectional title properties 

Freehold properties and sectional title properties can differ in the following ways:

Pricing and costs: Generally speaking, sectional title properties are currently more affordable than freehold properties, with one report citing that the national average price of section titles in the second quarter of 2022 was R1 049 437, compared to R1 422 901 for a freehold property.
Annual property price inflation is usually higher for freehold properties than for sectional title properties meaning that the former is more likely to appreciate in value over time.

Freehold properties and sectional title properties come with unique monthly costs. Sectional title owners can pay a set monthly levy that covers their contribution to the upkeep and insurance of their scheme's communal areas. They will also pay municipal rates and taxes for services such as refuse collection and streetlight maintenance, with some schemes offering additional levies in exchange for value-added services like added security. Freehold property owners pay rates and taxes costs directly to their municipality and must insure and maintain their property at their own cost.

Management: People living in a freehold property that want to make major changes to its structure will need to apply for planning permission from a local municipality or town planning department. These authorities will take into consideration if their building proposal is in line with their property’s permitted zoning and use and if their proposed build’s specifications are feasible and safety compliant. Apart from these requirements, freehold property owners won’t face many restrictions on their home’s design, colour scheme or architectural style.

Sectional title schemes operate differently. Any proposed changes to a sectional title property can require the owner to request permission from their body corporate. As the body corporate is invested in ensuring the entire sectional title scheme’s appearance is uniform and appeals to the average buyer, there are often major restrictions on what renovations and upgrades sectional title property owners can undertake. With sectional title homes, external repairs are usually the body corporate’s responsibility, while internal repairs are for the owner’s account. Individual body corporate roles have differing or more specific exclusions.

Security: Sectional title schemes often hire a security team to protect the property and control who enters and exits it. This can mean that any visitors require authorisation to enter the property and must park in designated areas. Holding a group event can require sectional title holders to seek permission from their body corporate or security team. A freehold property is unlikely to have these kinds of security measures unless it’s located in a boomed-off area.

A sectional title property’s body corporate can make decisions on the estate or complex security that can impact your property’s intended use. An example of this is prohibiting property owners from renting out their property for short-term accommodation through a service such as Airbnb. While similar laws might not apply to freehold properties, how a homeowner uses their property can impact their security options and subsequent property insurance.

Whether you own a freehold or sectional title property, using the building for business use can require you to speak authorisation. A failure to secure this can impact any homeowner’s comprehensive insurance claims you make.

Taking the next steps forward 

Once you’ve decided what type of property ownership you’re interested in, your next step will be to determine the value of the loan you require and apply for it. You can make this step progress more smoothly by working with one of South Africa’s only non-bank specialists that can offer you a home loan. SA Home Loans can help customers navigate the home loan process and everything it involves. Contact our team today to get started.