Compliance Checks and What to Look for Before Buying

Buying into a sectional title scheme is not just about acquiring a property – you’re also buying into a community and its financial and legal framework. One of the most important steps before signing is checking compliance. This ensures the scheme is being run correctly, financial and legal risks are minimised, and you won’t face unexpected liabilities after moving in.

Why Compliance Matters
Compliance is about more than ticking boxes. A well-managed scheme protects owners’ investments, ensures that levies are used correctly, and helps avoid disputes or legal problems later. Non-compliance with the Sectional Titles Schemes Management Act (STSMA), Occupational Health and Safety Act, or local bylaws can result in fines, rejected insurance claims, and even personal liability for Trustees.

Key Documents to Review Before Buying
When evaluating a sectional title scheme, request and carefully review the following documents:

• Management and Conduct Rules: Check whether the scheme’s rules have been filed with the Community Schemes Ombud Service (CSOS). Unfiled or invalid rules may create governance risks.
• AGM Minutes and Trustee Reports: These show whether annual general meetings are being held as legally required and whether major decisions are recorded. Consistently missed AGMs are a red flag.
• Insurance Schedule: Confirm that the body corporate has valid building, public liability, and fidelity insurance cover in place. Under-insurance can expose owners to special levies.
• Financial Statements: Look for audited financials that show healthy reserves, clear expense tracking, and compliance with the legal requirement for a separate reserve fund.
• 10-Year Maintenance Plan: A scheme without an up-to-date maintenance, repair, and replacement plan is not compliant with the law and risks high emergency costs.
• CSOS Certificates: Ensure the scheme is filing its annual returns with CSOS and paying contributions as required.

Red Flags to Watch Out For
While reviewing documents, take note of warning signs that could affect your investment:

• Repeated failure to hold AGMs or file annual returns
• Poorly kept financial records or missing reserve fund contributions
• Outstanding debts to municipalities or service providers
• Insurance gaps or evidence of under-insurance
• Disputes between owners and Trustees that appear unresolved
• Lack of an updated maintenance plan or deferred repairs

The Role of Professional Advice
If you are uncertain about compliance, ask your conveyancer, estate agent, or a specialist managing agent to assist. They can help you interpret the documents, highlight risks, and advise whether the scheme is being run properly.

Compliance checks are a vital part of the due diligence process before buying into a sectional title scheme. By reviewing rules, financials, insurance, and legal filings, you’ll protect yourself from unexpected costs and ensure you’re joining a scheme that values good governance and financial health.

The Importance of Inspecting a Scheme’s Financials before buying