When landlords assess a sectional title apartment for rental income, the focus typically falls on purchase price, expected rent and financing costs. Yet across large residential portfolios, a different variable repeatedly determines whether an investment compounds income or steadily underperforms. That variable is sectional title governance, starting with levy collection.
More than half of South Africa’s urban housing stock now sits inside sectional title schemes and estates. These buildings operate as shared financial systems. Levies fund security, insurance, utilities, maintenance and long term capital replacement. When collection is strong, buildings function and costs remain predictable. When it weakens, the economics deteriorate quickly.
“A sectional title scheme is effectively a micro balance sheet,” says Jonathan Kohler, CEO and founder of Landsdowne Property Group. “Landlords are not just buying a unit. They are buying into a cash flow system. If that system is unstable, rental yield becomes fragile very quickly.”
In schemes where levy arrears rise, management is forced into reactive decision making. Planned maintenance is deferred. Emergency repairs increase costs. Insurance claims rise. Levies escalate sharply to recover lost ground. Landlords absorb these increases immediately, while rental escalations lag or face resistance from tenants.
The risk is often mispriced at acquisition. Units can appear affordable with attractive headline yields, even as the underlying scheme is already under financial strain. By the time this shows up in resale values or vacancy rates, the damage has usually compounded.
Across Landsdowne’s national portfolio of more than 40,000 apartments and freestanding clusters, levy arrears consistently emerge as one of the earliest indicators of stress. “We often see payment behaviour soften months before any broader market weakness becomes visible,” Kohler says. “By the time prices start reflecting distress, the scheme’s financial position is usually already compromised.”
For landlords, the most important figure to interrogate is therefore not the current levy amount, but the collection rate. A scheme collecting consistently above 95% is fundamentally different from one operating in the high 80s, even if levies appear lower on paper.
Governance quality compounds this effect. Schemes with clear rules, professional enforcement and transparent financial reporting experience lower tenant turnover, fewer disputes and slower wear and tear. Poor governance leads to higher vacancy risk, reputational damage and rising operating costs, all of which erode net yield.
Rent control discussions further heighten this risk. While rental escalation may face political or regulatory pressure, shared costs are not capped. Security, insurance and utilities continue to rise. In weakly governed schemes, the gap between income growth and cost escalation lands directly on landlords.
“Landlords underestimate how quickly governance failures show up in net yield,” Kohler adds. “Higher turnover, more damage, more disputes. Individually these costs look manageable. Together they destroy return assumptions.”
What landlords should check before buying
Avoiding these outcomes requires treating sectional title due diligence as a core part of the investment process.
Before committing to a purchase, landlords should:
- Request levy arrears reports and confirm historic collection rates
- Review audited financial statements and reserve fund adequacy
- Assess whether maintenance is planned or purely reactive
- Understand how rules are enforced and disputes resolved
- Engage directly with the managing agent, not only the selling agent.
“The managing agent is often the best source of truth,” Kohler notes. “They can explain how levies are collected, how arrears are handled, and whether the scheme is running ahead of problems or constantly catching up.”
Where access to information is limited or resistance is encountered, landlords should treat this as a warning signal rather than an inconvenience. “In a well-run scheme, transparency is normal,” Kohler says. “If basic financial and governance information is difficult to obtain, that usually tells you something about how the building is being managed.”
For income focused landlords, the implication is clear. Yield stability in sectional title investments is increasingly decided at scheme level, not unit level. Those who price governance risk correctly protect both income and exit value. Those who do not often discover too late that their return assumptions were built on fragile foundations.
