The body corporate plays a pivotal role in maintaining the complex, enforcing rules, and managing the communal finances. Neglecting to assess the body corporate’s overall management, financial health, and effectiveness can lead to unforeseen challenges down the line.
According to Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg:“If it is inefficient or mismanaged, you could face various issues, including deteriorating facilities, unexpected special levies or poor security, which can directly affect your property’s value and your quality of life.”
Morné Prinsloo, REMAX Town and Country says when he is helping a buyer consider a sectional title unit, one of the most important steps in the due diligence process is reviewing the body corporate's financial documents. This is not optional advice. It is essential. A buyer who falls in love with a unit without understanding the financial health of the body corporate it belongs to may be buying into a liability that does not appear on the listing at any price.
"Less experienced agents often treat this step as a formality. They collect the levy schedule, confirm the monthly amount, and move on. That is not enough. Here is what I look for, and why each item matters," says Prinsloo.
The Statutory Audit Opinion
Prinsloo says under the Sectional Titles Schemes Management Act 8 of 2011 and its regulations, every body corporate is required to have its annual financial statements audited by a registered auditor. The auditor must express an opinion not only on whether the financial statements are fairly presented, but also on whether the body corporate has complied with the accounting requirements of the STSMA, whether the books have been kept so as to provide reasonable protection against theft or fraud, and whether the funds have been applied consistently with the scheme's management rules.
"The first thing I check is whether the audit opinion is clean or qualified. A qualified audit opinion means the auditor identified specific problems significant enough that they could not issue an unmodified report. This is a serious red flag. A buyer who purchases a unit in a scheme with a qualified audit without understanding what the qualification covers is accepting a known financial risk with unknown magnitude," he says.
The Reserve Fund
The STSMA requires every body corporate to maintain a reserve fund for the repair, maintenance, and replacement of common property. Since 2016, body corporates have been required to have a 10-year maintenance plan that identifies future major expenditure and ensures the reserve fund is adequately capitalised to meet it.
When I audit a body corporate's financials, I check whether the reserve fund exists, what its current balance is, and whether a 10-year maintenance plan is in place. A scheme with no reserve fund or a chronically underfunded reserve is a scheme where major expenses will be met through special levies charged to all unit owners. A buyer who purchases in an underfunded scheme may receive a special levy demand for R20,000 to R80,000 or more within months of transfer, with no option to avoid it. Special levy resolutions are binding on all owners under the STSMA. Once passed by the trustees, no individual owner can refuse to pay," he says.
The Levy Arrears Position
Prinsloo says he asks for the scheme's aged debtors report. "This shows which units are in arrears on their levies, how long they have been in arrears, and the total outstanding amount. Under the Christo Mulder Attorneys' January 2026 analysis of sectional title arrears, levy defaults are described as one of the most pressing challenges in South African schemes, exacerbated by rising living costs and financial strain on household budgets.
"A scheme where 15 percent or more of units are in arrears by more than 60 days is a scheme where the body corporate's operating cash flow is materially impaired. Security, maintenance, cleaning, and insurance are funded from levies collected monthly. When a significant proportion of owners are not paying, essential services get deferred or cut, which affects the quality of the living environment and the market value of units in the scheme," he says.
He adds that the Prescription Act provides that levy arrears can prescribe, meaning they can no longer be legally collected, after three years from the date they fell due, if no interruption of prescription occurs. A body corporate with old, large arrears that has not been actively collecting through the courts or CSOS may find a significant portion of those arrears unrecoverable. This is a balance sheet impairment that affects every owner in the scheme.
Year-on-Year Budget Variances
Prinsloo says he comparea the current year budget to the previous two years. Budget items with variances of more than 15 to 20 percent between years without a clear explanation are worth investigating. They may reflect significant maintenance costs that were not anticipated, increases in security contractor costs, or utility bill increases that signal a deteriorating infrastructure. Trafalgar's guidance on sectional title management confirms that large unexplained budget variances should raise a red flag for any owner or prospective buyer reviewing scheme financials.
Insurance
Every body corporate is legally required to insure the buildings in the scheme for their replacement value. "I check whether the scheme has current building insurance, whether the insured amount has been reviewed recently against current construction costs, and whether the policy covers all the standard risks. An uninsured or underinsured scheme is an immediate and serious risk to every unit owner," he says.
What to Do With the Red Flags
"If a body corporate audit reveals any of these issues, I do not advise a buyer to walk away without further investigation. I advise them to seek a written explanation from the managing agent, to request the minutes of the most recent AGM and trustee meetings, and to understand precisely what is being done to address each issue. Some problems are actively being resolved. Others are being ignored. The difference is critical.
"A well-run scheme with strong financials is an asset. A poorly run scheme with hidden liabilities is a risk that no listing price adequately reflects," he says,
Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg explains the body corporate’s crucial role and how it affects property owners:
Shared Responsibilities: In a sectional title property, individual owners own their units, but the common areas, such as gardens, walkways, parking areas, and pools, are managed by the body corporate. The entity is also responsible for the upkeep of the exterior of buildings, including painting and structural repairs. Poor maintenance can not only affect your quality of life but also the resale value of your property.
Financial Health of the Scheme: One of the most critical aspects is the financial stability of the body corporate. If it is poorly managed and has insufficient reserves, you may be faced with special levies—additional charges to cover emergency repairs or upgrades to communal areas.
For instance, if the roof of the complex needs repair and there’s not enough money in the reserve fund, every unit owner will be expected to contribute. A well-managed body corporate with solid financial reserves prevents these unpleasant surprises.
Impact on Property Value: A mismanaged body corporate can significantly impact the overall value of the entire complex and, thereby, the individual units as well. Buyers are likely to steer clear of complexes with high levies, poor maintenance, or management issues. Over time, the condition of the common property will further deteriorate, which can drag down the resale value of your property and make it harder to sell.
Enforcing Conduct Rules: A body corporate is also responsible for enforcing the rules of the complex which may include guidelines about pets, noise levels, use of communal areas, and parking. A well-run body corporate ensures these rules are fairly enforced, which helps maintain peace and order in the complex. On the other hand, a poorly managed body corporate may fail to resolve disputes or apply rules consistently, which can lead to frustration and conflict with neighbours.
