The participation quota refers to the formula that is used to calculate the section owner's levy contribution in a sectional title scheme. The participation quota determines the owner's undivided share of the common property, and the value thereof.
Before investing in sectional title property, it is important to understand how levies are calculated according to their participation quota.
Some people may argue that there are certain areas included in their participation quota that they do not use. And if they do not use it, why should they pay?
For example, a section owner who lives on the ground floor, and never finds the need to use the elevator, might see it as unfair to contribute towards the repair of the elevator.
In the Sectional Titles Act clause 32(1) it states that:
“Subject to the provisions of section 48, in the case of a scheme for residential purposes only as defined in any applicable operative town planning scheme, statutory plan or conditions subject to which a development was approved in terms of any law, the participation quota of a section shall be a percentage expressed to four decimal places, and arrived at by dividing the floor area, correct to the nearest square metre, of the section by the floor area, correct to the nearest square metre, of all the sections in the building or buildings comprised in the scheme.”
This means that if the levy of the sectional scheme amounts to R500 000 per annum, at a participation quota of 5 percent, owners will have to pay a levy of R2 083 per month.
When formulating a property investment portfolio, it is important to consider these factors before you sign an offer to purchase.
At Van Deventer and Van Deventer Incorporated, our attorneys guide investors through the process of right properties, by minimising their risk and helping them understand how their participation quota would be calculated.
If you are thinking about purchasing a section in a sectional title scheme, contact us today.
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