It is interesting to see, particularly on the South Coast of KwaZulu Natal, just how many apartment blocks are still run as share blocks (which was the popular development system used to manage blocks of flats in the 1970s and 1980s), says Michael Bauer, general manager of IHFM, the property management company. 

Share blocks can be complicated to run as they are classed as companies, said Bauer, and each owner of a unit has shares on the company. The shares are usually allocated to different parts of the building, i.e. parking, gardens, the apartments, etc. So, in owning those shares the owner has the exclusive use of the parts of the building he has shares in. The company, in this case, owns the immovable property.

The drawback of a share block is that the management, the directors, can make decisions without consulting any other shareholders in the block, said Bauer, and because the owners own shares and not the property, they can never use this as leverage to get finance on another investment. This is also to the potential buyer's disadvantage because they cannot borrow 100% against shares, but would be able to get a 100% home loan against a section.

Sectional title schemes are run by the body corporate, of which all owners are automatically members, so owners here have a say in the way the scheme is run. They vote the trustees in who manage the scheme and can give directives at general meetings as to the way their scheme is run.

Conversion to sectional title is usually recommended, says Bauer, and it is done according to a schedule as outlined by the Share Blocks Control Act. If this is to be done, the company must first draft the documents to show its members what the sectional title plan will be and what rules will apply. To convert from a share block scheme to sectional title only requires 30% of the votes from owners, and after the decision to convert has been made, half the owners must support the resolution. If there is still a bond on the property, the bondholder must also agree to the changeover.

Once the above has been done, a sectional title register is opened and the owners can take transfer of their units. They now become owners of immovable property, instead of owners of shares in a company, which will then allow the owners to reap the benefits of owning their properties such as using it as collateral if they choose to buy another property as an investment.

"Owning your property is far preferable to owning shares in a company," said Bauer. "The first benefit is the investment is owned outright and the second is the direct participation now afforded to the owner of the unit in his scheme."

Share blocks can be complicated to run as they are classed as companies, said Bauer, and each owner of a unit has shares on the company. The shares are usually allocated to different parts of the building, i.e. parking, gardens, the apartments, etc. So, in owning those shares the owner has the exclusive use of the parts of the building he has shares in. The company, in this case, owns the immovable property.

The drawback of a share block is that the management, the directors, can make decisions without consulting any other shareholders in the block, said Bauer, and because the owners own shares and not the property, they can never use this as leverage to get finance on another investment.  This is also to the potential buyer’s disadvantage because they cannot borrow 100% against shares, but would be able to get a 100% home loan against a section.

Sectional title schemes are run by the body corporate, of which all owners are automatically members, so owners here have a say in the way the scheme is run. They vote the trustees in who manage the scheme and can give directives at general meetings as to the way their scheme is run.

Conversion to sectional title is usually recommended, says Bauer, and it is done according to a schedule as outlined by the Share Blocks Control Act. If this is to be done, the company must first draft the documents to show its members what the sectional title plan will be and what rules will apply. To convert from a share block scheme to sectional title only requires 30% of the votes from owners, and after the decision to convert has been made, half the owners must support the resolution. If there is still a bond on the property, the bondholder must also agree to the changeover.

Once the above has been done, a sectional title register is opened and the owners can take transfer of their units. They now become owners of immovable property, instead of owners of shares in a company, which will then allow the owners to reap the benefits of owning their properties such as using it as collateral if they choose to buy another property as an investment.

“Owning your property is far preferable to owning shares in a company,” said Bauer. “The first benefit is the investment is owned outright and the second is the direct participation now afforded to the owner of the unit in his scheme.”