INVESTOR INTELLIGENCE
The most important of these differences is that when you buy into a shareblock scheme , you are not buying ownership of any actual property . Instead , you ’ re buying a block of shares in a company which owns the property , and with these , the right to use specific parts of that property , such as the apartment you will occupy , a parking space or a garden .
For this reason , you will need to conclude a Use and Occupation agreement with the company , which is run by a chairman and directors . You will not receive a title deed for your home .
This leads to the second major difference that buyers may need to contend with , which is financing . There is only one bank we know of that will sometimes do so , using the buyer ’ s share certificate and cession of shares as security against default . However , the loan period will usually be shorter than the normal 20-year home loan , and a higher interest rate will usually also apply .
“ Since there is no physical property to act as collateral against a mortgage bond , there are very few financial institutions that will finance a home purchase in a shareblock scheme .”
So in the majority of purchases , the shareblock buyer will either need to pay the whole purchase price in cash , or be willing and capable of obtaining a personal loan for that amount . This lack of easy home finance will of course also make reselling at a later stage much more difficult .
86 NOV 2022 SA Real Estate Investor Magazine