When you buy a property and the agent tells you it is a freehold, full title or sectional title, do you know what it means?

Freehold or Full title

This type of property ownership describes the transfer of full ownership rights of the property, and land, that you are buying.

Types of freehold and full title properties:

• House:
  A normal, free standing house with an ERF number.
• Cluster House:
  A group of more-or-less the same type of property. This group is usually has limited access through a security control gate. Each house is individually owned and there are no levies to be paid. These types of complexes usually have a home owners association the owners pay a nominal fee to. The association takes care of the upkeep e.g. the security guards etc.
• Residential property that is used for business purposes:
  When more than half of the residential property is used for business. Usually when a property is bought for business purposes a risk premium is applicable above the qualifying home loan rate.
• Smallholding:
  When a property is situated within 150km radius of a built up area and does not exceed 20 hectares and connects to a local authority water supply, or has a borehole. The property must have a dwelling and the main source of income must not be from farming.

Sectional title

Separate ownership of units or sections within a complex and has communal areas that can be used by all the residents e.g. driveways, gardens, swimming pool, club houses, corridors, lift, entrance foyer, outer wall and foundations. Sectional title complexes have a body corporate that maintains the complex. Residents pay the body corporate a levy which is used for maintenance. In a nutshell, if you own a sectional title unit, you own the inside of the unit; the outside belongs to the body corporate.

The body corporate consists of all the owners of the units. It is important to know that as an owner of a unit you are part of the body corporate and you are liable for all debts incurred by the body corporate. It is a good idea to request financials from the body corporate before you buy a unit.

Types of sectional title properties:

• Mini subtype house:
  Small, sub-divided portion of a larger property which is used for cluster housing.
• Semi-detached house:
  Two houses that are attached to each other.
• Townhouse or flat:
  These are units in a security complex and may only contain residential units. Usually they can be distinguished by having more than one floor with separate units on each floor. Complexes that have more than three floors usually have a lift. The levy in a complex with a lift is usually more than in one with no lift.
• Duet house:
  These are similar to semi-detached houses except that there are two separate free-standing units on one stand. It can also be two dwellings that are attached to each other on one stand.

Many real estate investors prefer sectional title units because of the fact that the body corporate maintains the outside and the investor only has to worry about the inside.