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What is Share Block Ownership
What is Share Block Ownership?
In many ways, share block ownership is similar to sectional title ownership. The key difference is that in a share block scheme, you own shares in a company that owns the land and building; you do not own an individual unit. You have a “use and occupation" agreement with the company entitling you, as a shareholder, to the use of a particular part of the company’s property, and you are issued with a share certificate instead of a title deed.
Share block property sale and ownership is governed by the Share Blocks Control Act. Share block companies must be registered with the Registrar of Companies. By law, a seller may not sell shares in a share block scheme unless the company has the words “share block" or “aandeleblok" as part of its name.
When you buy shares in the share block company, you are entitled to occupy a specified portion of the building owned by the company and to vote at its general meetings. You will be allocated voting rights in proportion to the number of shares you hold.
When a shareholder sells his shares, it is a normal sale transaction between two parties, except that you are dealing with the sale of shares and not the sale of immovable property. The money does not go to the company but to the person you are buying the shares from.
If you are buying shares in an older, well-established share block scheme such as Village of Golden Harvest 2, you are required to pay the full price for your shares in the scheme before you are allowed to take occupation.
Levy and trust fund
As in a sectional title property, in a share block scheme you have to pay a monthly levy for administration and maintenance costs.
The levy covers costs such as the rates, the payment of staff, insurance premiums, the costs of a managing agent, and common water and electricity (if you do not have separate meters).
The amount you pay is in proportion to the number of shares you own. For example, if you own 10 000 shares and Tom owns 20 000 shares, he might have the use of a two-bedroom flat compared to your one-bedroom flat. Tom would also have greater voting rights than you, and he would pay a levy that may be twice the amount of yours.
According to the Share Blocks Control Act, the share block company must have a trust account, and money in this account must be kept separately from all other funds. The trust account must be used only to pay the company’s loan obligations. The share block company, like other companies, must produce regular, audited financial statements.
As a shareholder you have the right to elect directors for the share block company at the company’s annual general meetings. You are also eligible to become a director of the company. The directors meet throughout the year to discuss how the property is being managed.
Obligations
Your obligations as a shareholder in a share block scheme are to:
• Pay the monthly levy;
• Keep your exclusive part of the building in a neat and tidy condition;
• Allow the company reasonable access to inspect your section of the building when necessary;
• Be responsible and financially liable for any repairs to the interior of your unit, such as fixing a burst geyser in your flat; and
• Take out household contents insurance. The share block company will not accept responsibility for damage arising from an accident or an injury occurring within your unit but should have a public liability policy covering it against mishaps occurring on the common property.
WHAT YOU MUST BE TOLD
According to the Share Blocks Control Act, when you buy into a share block scheme, your sales documentation should contain at least the following information:
• Details of the directors, auditor and management of the share block company;
• Details about insurance of the property;
• The latest annual financial statements of the company;
• The memorandum and articles of association of the company, which tell you what your obligations and rights are in that particular scheme;
• The use agreement;
• The management regulations of the scheme;
• Confirmation on whether a sectional title register has been opened or whether one is anticipated.