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Do you pay your managing agents enough?

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Most body corporates have a managing agent for a wide variety of reasons.

The most important is that running a body corporate is rather technical and most trustees neither have the time nor skills to manage them.

The first question asked by trustees when looking for a new managing agent is: “How much . . .” – which is probably the last question they should be asking. 

By that I mean most body corporates pay so little to their managing agents that they actually make it a lost leader for their managing agents.

Yes, I am suggesting that most managing agents make a loss on the schemes that they manage. 

It’s true.

A managing agent must have skilled staff. They need a bookkeeper, they need a property manager, they need inspectors.

They need an office – one that can allow them to hold body corporate meetings – just think of the size that they need to hold a meeting of 30 property owners.

They need computers and the internet and a reception, transportation to visit the properties and much more. 

Most importantly, they need to have somebody that has knowledge about how to run a body corporate and all the commercial, financial and legal knowledge that is needed to do that.

Being a managing agent is not for the faint-hearted.

In Bloemfontein, the average fee per unit is probably around R120.

So, a normal-sized scheme of 30 units would pay a fee of just R3 600 per month.

I just don’t see how any managing agent can make a profit on such a low fee.  

If we think that a plumber will charge an hourly fee of R500 or more for a service job, then the managing agents’ highly skilled staff should be paid at least at this level or more.

Accountants and bookkeepers would certainly earn more than this as a salary.

Having the portfolio manager visiting your property could well entail close to two rather than one hour if you look at travel time and on-site inspection.

At around R800 per hour this is worth R1 600 of anyone’s time.

Not much left over is there? 

For instance, an owner recently asked us to visit his flat in Bainsvlei where there is a water leak between his flat and the one below.

This involved a visit by the portfolio manager, the letting agent in our company and myself at a cost of around R2 600 per hour, for a problem that was between him and the neighbour below and not a body corporate problem.

Many body corporates are just too small to employ a managing agent, though they really do need one. 

I don’t believe that our company can afford to manage a body corporate of less than 40 units and would prefer to look after schemes that are 100 units or bigger. 

A few weeks ago, we were told of a body corporate that is looking for a managing agent that has 15 000 units!

The only problem is that it is in Russia, though I must tell you that we are tempted.

We have noted a trend that body corporate trustees and owners are beginning to realise the value of good managing agents.

These managing agents are the ones that make life simple for owners and trustees alike.

They are able to give accurate and up-to-date budgeting and financial reporting on a monthly basis and in a way that is easy to understand even by a non-financial person. 

And for that level of service, they are prepared to pay a higher per-unit fee with a 27-unit scheme paying the fees of a 40-unit scheme to get the services that they need.

Managing agents are in business to make money and to do so they need to look at larger schemes and those that pay higher fees.

Body corporates have to decide what level of service they want and can afford.

But if you don’t pay your managing agents a proper fee, you won’t get the level of service that you would like to have.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. 

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Property

Brain drain threatens property industry

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SECTOR NOT SPARED . . . South Africa is losing potential property buyers through emigration

South Africa is faced with a potentially damaging brain involving both newly qualified and experienced professionals across different disciplines.

I will not limit this topic to professionals in the property industry only because whatever happens in one sector has a direct impact on all matters property.

I will explain briefly: if a teacher, medical doctor, artisan or engineer decide to seek greener pastures abroad, it means the property sector has lost some potential customers who were either going to rent at some point or buy their own property.

Of course, some might decide to invest back home, but that possibility is not always guaranteed.

We have also seen professionals in the property industry such as architects, estate agents and quantity surveyors leaving the country, thereby directly impacting on the work done in the sector.

Practically, every time the economy gets tough it is natural for skilled professionals to look for more active areas to live and work in.

This might mean moving to the Cape from the interior because it is perceived that the government of these areas is better as are the opportunities for these professionals.

Artificial barriers to employment for these professionals can result in them seeing opportunities overseas that are not available to them here.

This is what is happening now, and has been happening for some time.

Highly skilled professionals are moving overseas in the search of better opportunities.

Typical of this would be my son who has an accounting degree and another one in internal auditing.

He is a determined and hard-working professional.

Notwithstanding that he can be seen as being at the top of his profession, he found himself being bypassed by less qualified and experienced people here.

The result was that he was required to do the job for his boss.

He eventually went overseas and has gained far higher and well-paid positions because of his abilities – at a total loss to the South African economy.

This is happening in every sphere of professionalism here, especially among the younger family generation.

Political interference, such as state capture, is also resulting in highly qualified black professionals seeing their future overseas.

America and Europe as well as Australia and New Zealand welcome these well-trained and ambitious people with open arms.

They are seen as hard working and innovative people.

It is amazing how many of these South Africans rise to the top of their professions.

Just think how much Elon Musk would have contributed working in South Africa today.

How can this emigration be stopped?

The answer is simple: just make it attractive for these people to stay.

Get rid of the Broad-Based Black Economic Empowerment and allow promotion on merit.

How can you select doctors on colour and not on their academic results?

Taking a person with C grades against one with A grades just does not make sense.

We need to do away with biased allocation of tenders – get rid of racial undertones and appoint people on their ability to do the job.

A huge problem is going to occur is when the current older generation of professionals retire.

Few new property valuers are coming through because it is a profession that requires a high level of understanding of building processes and detailed comparisons of past data.

Schooling is simply not orientated towards creating administrators and professionals and South Africa is going to see a dearth of professionals over the next few years.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

Thoroughly inspect the property before buying

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I recently wrote about the new law making it compulsory for sellers to make a declaration about the condition of the property they are putting on the market so that the buyer is fully aware of its condition including faults that may need to be fixed.

I am told there is a Gauteng family that bought a house at an auction only to find it occupied by “illegal tenants” who did not want to move out.

I have been asked discuss how this can be avoided or addressed.

My advice is simple: sellers should declare what they know about the property and they should draw up a contract that makes it clear that the buyer is buying a property that he/she has seen and done the necessary investigations on their own.

The new law regarding seller declarations has only just come into force and it’s not surprising some people could be facing challenges when buying property and don’t know how the new law could assist them.

To begin with, the new law means that the seller is required to declare any faults or condition of the building that is being sold or those that he should reasonably be aware of.

Remember sellers seldom have the skills necessary to know whether or not there were, for example, problems with the foundations unless these had caused problems in the past.

In my opinion, this is yet another piece of legislation that gives more rights to purchasers than they should have.

While I am happy that sellers should indicate any serious problems that they were aware of or should have been aware of, it should also be a requirement that a buyer should understand that they are not buying a new property and should take reasonable care to know what they are buying.

This includes the physical state of the building and anything else that could be going on at the property.

It has always been the case that a seller could never deliberately hide problems – for example, cover over serious dampness with a bookcase or not let a buyer know about roof leaks.

But, in my opinion, it is simply making it more difficult to contract freely.

On the other hand, buyers should carefully look at properties that they are considering buying.

Nobody can expect them to climb into roof spaces and again buyers cannot be considered experts in buildings.

Normally serious problems would be visible from the inside or outside of a property.

Both sellers and buyers should look carefully to see that water flows properly and that there are no serious problems with the building on the market.

They should also remember that not every small defect is a problem.

I have lived in my house for over 45 years.

Is it perfect?

No.

But those small problems – little cracks or a solar system that trips if there is especially heavy rain are not serious problems.

Bottom line: one is buying a second-hand product and not a new one.

It is therefore important to thoroughly inspect it and be sure about its availability before entering into or concluding any purchase agreement.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

No rush back to the office

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LOW DEMAND . . . There are large numbers of vacant and under-utilised offices across the city

While there are a few owners who want staff back in the office in order to start having face-to-face meetings, online meetings have become the norm.

It is just another indication that the demand for office space is not likely to grow soon, particularly in Bloemfontein.

We can see in the market that there are large numbers of vacant and under-utilised offices across the city.

The demand is simply not there.

What can be done with these offices to create an income?

Firstly, we should remember that many of them are simply converted houses, so a possible solution is to return them to their original use as a single home or to split them into a number of smaller apartments.

The market for such units is good now and it is a realistic option, provided that bathroom facilities are there or can be easily put in.

Secondly, the same can be said for small offices, especially in Westdene as most house-sized units are too large for smaller businesses.

Something needs to be done because landlords cannot continue to suffer from these properties standing vacant.

And if you have tried looking for a nice place to stay, it seems there are very few quality residential places to let.

Even if you are prepared to pay over the odds to rent something neater, newer, or nearer to work, you are going to be disappointed.

Apart from Langenhoven Park and a few areas in the north, there has been very little development taking place around the city.

Even fewer of these areas have allowed for the development of flats or apartments, so the new supply is very limited compared to the current demand.

Any middle-of-the-road potential tenant will find it near impossible to find an affordable luxury apartment to rent – at any price.

It is quite surprising because the cost of land is high and putting three times the units on a site should be a preferred option for developers and reduces this cost per unit by two thirds.

Servicing an area of flats is going to be less than servicing an area of single-storey units.

With relatively large flat sites compared to individual stands the services are simpler, the roads are far fewer and cheaper to construct in total.

It is disappointing that developers have not taken these new dynamics on board and are still developing small sites that cannot accommodate more than 25 units while the demand for large multi-unit developments remains high.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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