Share-Block Properties: In this setup, buyers purchase shares in a company that owns the property. Purchasing shares in a share-block company is common in holiday resorts, retirement villages and office blocks.
Share-block properties offer a unique way of owning and using property in South Africa.
Here are the key points about share-block properties:
- Ownership Structure: In a share-block scheme, a company owns the entire property or development. Individuals buy shares in this company, which grants them the right to use a specific unit or portion of the property.
- Use Agreement: The rights and responsibilities of shareholders are governed by a use agreement and the company’s memorandum of incorporation. This agreement specifies which part of the property each shareholder can use.
- No Title Deed: Unlike sectional title properties, shareholders do not receive a title deed for their unit. Instead, they own shares in the company that owns the property. A Purchaser of shares in a Share-block Company will never Own the Property.
- Allocated Loan: Shareholders often take on a portion of the company’s loan obligation, which is paid off through monthly instalments. This loan is typically used to finance the development of the property.
- Legal Framework: Share-block schemes are regulated by the Share Blocks Control Act of 1980. This act ensures that the rights of shareholders are protected and that the company operates transparently.
- Risks: One potential risk is that if the share-block company becomes insolvent, shareholders may lose their rights to use the property. Therefore, it’s important to thoroughly understand the financial health of the company before investing.
Share-block properties can be an attractive option for those looking for a different form of property ownership, especially in holiday resorts and retirement villages and the use of office space.