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How HOAs are Different from Sectional Title Schemes

How HOAs are Different from Sectional Title Schemes

Many people might ask about the difference between HOA (Homeowners Associations) and Sectional Title Schemes as they move from an apartment building to the suburban areas or vice versa. In this article, we want to give you a guideline to rely on when it comes to this question. Let’s look at the main characteristics of an HOA and the general differences to sectional title schemes. The main difference lies in the way that ownership is defined in the properties and what services are each responsible for.

Homeowners Associations (HOAs)

HOA schemes are generally consisting of a group of individually owned properties that share common infrastructures, such as roads, security services, parking bays and recreational facilities. In other words, it provides the benefits of exclusive ownership of the home but still provides the benefits of communal living. 

An HOA is founded to manage and maintain common areas such as roads and ensure general security. They are separate from their members and registered in the name of the HOA at the deeds registry. None of them should have the right, title or interest in the property or its funds and assets in HOA schemes. The homeowners are only directly responsible for the property they own. They have to solely deal with property insurance, utilities, taxes and other service costs that might occur. The main function of the HOA depends on the funding document but generally consists of the below:

  • Oversee and arrange the maintenance of all communal buildings and areas within,
  • Managing all the agreements with third parties (either local authorities or contractors) that supply any type of service to the property and its owners,
  • Ensure that all activities within the estate comply with local municipal laws.

complex property management

Sectional Title Schemes

The fundamental idea behind sectional title schemes is the division of a property into parts that are exclusively owned by individual owners. Also, other parts that are jointly owned in undivided shares, referred to as “common property”. This way you can both have joint and exclusive ownership within a building or property. 

As an example, you could exclusively own your flat within a building but you would be having shared ownership of common areas such as the garden or the main entrance. Also, there could be areas, like the parking lot, that you do not own but you have the exclusive right to use. In the case of a sectional title scheme, your levies might be higher than in an HOA as this not only deals with maintenance and management but also includes building insurance. In sectional title schemes, the body corporate has elected trustees from the member homeowners whose duties usually include:

  • Setting up a budget and reserve funds that are then used for managing and maintaining the common property,
  •  Arranging the insurance of the property,
  • Dealing with local authorities and utility providers.

Conclusion

As you can see, the responsibilities are rather similar but there is one main difference you need to consider; the body corporate in sectional title schemes is responsible for the insurance of the property and to carry out repairs of the common areas and the exterior of the building. Whereas HOA schemes the owners are individually responsible for both the interior and exterior of the property and its insurance.

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