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What maintenance is the body corporate responsible for?

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It is not always so easy to know what the body corporate is responsible for or not.

For example, some experts feel that while the line goes through the middle of the garage door, the mechanism that is clearly inside the garage is part of the door and the cost of repair of this part of the door should be shared by the body corporate.

My feeling is that because it clearly lies within the unit and as only the unit owner (tenant) has full use of it, they should be responsible for the repairs of this part of the door.

The body corporate is responsible for the box of the units outside.

So, if damp comes through the wall from the outside and causes problems inside the unit, then the body corporate would have to sort the problem.

Owners and tenants need to report problems to the body corporate – for example, roof leaks, and not leave these faults until they become a real problem.

In that case the owner must repair the problem not the body corporate, or at the very least the body corporate can do the repair and claim the additional cost from the owner of that unit.

This is on the principle that the body corporate cannot be expected to cover the cost of a major repair over a minor one because the owner (tenant) did not report the problem in time.

It is also important for body corporates to understand that any repairs that they do must be normal acceptable repairs.

The body corporate cannot be expected to buy the best and most modern pool cleaner when a normal creepy would do a very adequate job.

Lastly, owners must realise that they cannot just do repairs without first getting approval from the body corporate.

For example, an owner cannot replace a garage door and recover half the door costs from the members of the body corporate because he decided the door was old and should be replaced, especially if he changes it from an opening door to a roller door.

The body corporate decides when things need to be repaired or replaced.

  • 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

Body corporates have no business making arrangements with debtors

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DEBT IMPLICATIONS . . . Poor collections have a major effect on the value of the property being appraised

I am going to rehash the importance of paying levies on time and in full because it remains a sticky matter.

Times are tough with many people losing their jobs or having less income.

From a body corporate management side, it is important that trustees and managing agents understand their very important roles in running any body corporate.

Trustees and managing agents are there to enforce the rules and to collect the agreed levies – period.

Not making the strongest effort to collect outstanding levies means just that and is not acceptable.

If one owner owes months of levy, effectively other owners have to subsidise the unpaid levy.

In effect the body corporate is giving a loan to an owner.

While this may not mean an immediate increase in the actual levy, that is the real effect.

Unpaid levies can only come from one place, the reserve fund, and there are now buildings and complexes that have proper budgets and levies to run their operations on a daily basis and to collect the required long-term reserves but in effect are running in a negative financial situation when you calculate the charged income, less prepaid levies and services, less the agreed reserves.

This situation is becoming more and more common.

It does not matter that your 100-unit building has R1-million in the bank if it was supposed to have R2-million if all the levies were collected.

It still means that the building is running with a deficit on its budgeted funds of R1-million.

Trustees and managing agents have no authority to make arrangements with outstanding owners, especially those that owe substantial sums.

More and more owners are getting seriously in arrears and it is having a major effect on the finances of their buildings as a whole.

Some of them are now becoming marginally viable.

This is especially the case if the situation continues to deteriorate so that the bad debt rises from 10 percent to levels of 25 to 30 percent and in many cases even higher.

The courts are greatly to blame.

While it is now possible to go the Community Schemes Ombud Service (CSOS) route, our company has not seen the result of these applications to date.

Going the legal route has now become not only immensely expensive but also far too time consuming.

How can the trustees and managing agents do proper credit control when the basic procedure to notify the debtor can take three months, followed by an application to court?

Court dates are months into the future and certainly not less than three months in advance of putting in a claim.

When the court date does arrive, it is quite frequently delayed for another three months because the magistrate does not feel up to the job or the recording system is not working.

Even where the courts are working, they are often heavily biased in favour of the defaulting owner or tenant.

Paying your levy is the minimum that you should be doing if you own a unit in a sectional title scheme.

If you don’t or cannot then it is not for the body corporate to give you time to pay.

It is your responsibility to find the money from somewhere and immediately bring your levy up to date.

That is part of being a property owner.

Far too many owners feel that they are being victimised because they are being pressed to pay up or sell out.

It is not the body corporate’s problem that you have not had a tenant for two or three months.

Find the money or sell.

This is the attitude that should be taken, especially where the owner is an investor owner.

The problem is that when the body corporate takes a lenient view debt mounts up.

If action is only taken after three months and take another three months to come to court then already that owner can be up to a year in arrears.

At that stage they don’t have the means to pay their debt.

I would suggest that no body corporate has the right to make any arrangement that extends longer than four months to fully bring your account up to date.

Longer than that you are giving a loan to the owner.

Interestingly by going to the CSOS it is possible to make a direct claim to attach the income from the owner’s tenant (if you can find their details), in which case the CSOS will instruct the tenant to pay the full rent amount to the body corporate until the arrear levies are paid in full.

This compares to a court order via the attorneys where you attempt to attach the rental from the tenant.

Before the attorney goes that route they are looking for at least R10 000 up-front payment by the body corporate.

The irony is that if owners are not paying, then the body corporate does not have the money to pay up front and therefore cannot attach the rental.

The CSOS is currently free (it used to be R50).

From a valuation point of view, it is vital that the valuer doing a valuation in a sectional title building is offered a copy of the annual financial statements plus a copy of the current income and expenses on the building.

A clear indication of trouble would be where there are no current financial statements available – this is quite common with many body corporates being years in arrears.

The same applies to the current financial situation.

Where these figures are not available or where they show serious percentage of long-term outstanding levies, then this must have a negative effect on the real value of a particular unit.

If the accounts are so poor that the building does not have funds to pay its way, then the value of any particular unit must be dramatically reduced.

Some schemes are in serious trouble with outstanding levies being equal to the whole of the current proposed budget.

Schemes with serious arears of 25 percent or more are in serious risk of being bankrupted.

This is not an isolated case.

I would suggest that on a national basis probably 25 percent of body corporates are in serious financial trouble.

Ways must be found to alleviate the situation.

Firstly, a bold strong credit control situation must be put into place.

Anyone who is more than one month’s levy in arrears must be handed over to the CSOS or an attorney for collection.

Leaving the situation allows owners to believe that no serious action will be taken.

Owners need to be told in no uncertain terms that paying your levy is part of property ownership and that other owners will not tolerate unpaid levies.

Those that are in arrears must be told plainly what the options are, which simply put is a choice of:

  1. Pay your levies on time
  2. Make arrangement to pay off arrears over a three-month period and bring your account up to date
  3. If you don’t pay your levy or keep to the arrangement then the body corporate will:
    • Blacklist you – causing serious financial inconvenience including the probability that you will never at a bond again.
    • Request attachment of the property and have it sold by Judicial mean, which will usually result in bargain hunter prices being paid. Not only will you receive a knock-down price on your property but all your debts will remain in force ie for rates and taxes, levies, etc.  You won’t be able to get credit open a store account and are likely never to be offered a home loan again.
  4. I would also suggest that the outstanding levy needs to be added to the next year’s budget because the body corporate needs the money to run. Upping the levy in this way will be a sobering reminder to every owner that they need pay their levies on time’

Effectively, what happens in a low-collections building is that maintenance suffers.

This will have a major effect on the value of the property being appraised.

No matter how nice a building is inside, being generally neglected and having large future debt collection problems must have a serious effect on the value of ay unit, even in the best run scheme.

Valuers must take great care when valuing individual sectional title units that they have the full picture of how well the scheme is being managed from a financial point of view

  • 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

Gas it out, give Eskom the boot

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ALTERNATIVE SOLUTION . . . Gas can be used for heating water, ovens and stoves in general

Electricity has simply become unaffordable. And, as if that’s not enough, it’s not always available.

In recent months, the power utility has been churning out media statements explaining the loss of generation at various power stations and pleading with consumers to use electricity sparingly.

While the updates are important, consumers naturally expect electricity to be available whenever they turn on the switch.

The recent tariff hike of over seven percent in Mangaung Metro has proved quite steep to most households and it might not be far-fetched to expect another round of hikes in the coming months.

I strongly believe it’s now time to seriously consider other practical solutions to end this double inconvenience of high prices and inavailabilty of electricity.

Alternatives like solar and gas could ease the problem quite significantly but it comes at a cost.

In fact, the installation costs might be quite discouraging, but once the systems are in place, there are no major expenses to be incurred – this including solar electricity, solar water heaters and gas.

Electrical geysers chew electricity while solar heaters are effective and efficient.

Natural gas is also a realistic alternative.

The system is cheaper to install by far and gas cylinders normally last for months.

Gas can be used for heating water, ovens and stoves in general.

Larger systems can also have central heating.

Gas is readily available and suppliers have delivery services for 10kg cylinders and above.

And unlike electricity, gas geysers only heat water on demand, which means that you don’t sit around with pre-heated water in your geyser.

It only heats on demand.

And when cooking, pans heat up quickly and, importantly, cool down when the gas is switched off.

It is a different type of heat and is great for making oven bread.

Worth a try!

  • 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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Local

Langenhoven Park chain store robbed

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SHOP ROBBERY . . . The Walk Centre in Langenhoven Park

Bainsvlei police in Bloemfontein have launched a manhunt for suspects involved in business robbery at a chain store at The Walk Centre in Langenhoven Park on Wednesday.

The complainant, who is the manager of the shop, told the police that two men walked into the shop pretending to be customers before robbing the shop.

“Suddenly they pulled out firearms and accosted the four cashiers and instructed them to walk back into the complainant’s office,” police spokesperson Lieutenant Colonel Thabo Covane said in a statement.

“The suspects robbed the shop of different brands of cellular telephones as well as an undisclosed amount of money, and fled the scene in a white Renault Clio with registration number HRT 558 FS,” he added.

Police were called to the scene and they are now investigating a case of business robbery.

Covane said anyone who might have information that could lead to the arrest of the suspects may contact Captain Thapelo Motseki on 082 466 8405 or call the SAPS Crime Stop number: 08600 10111. Alternatively, information can be sent via MySAPS App. – Staff Reporter

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