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City properties need a touch-up to remain attractive

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DILAPIDATED PROPERTIES . . . Older buildings built before the 1980s are in many cases in need of major upgrades

It is apparent that there are more and more buildings, especially in Bloemfontein’s central areas, that are standing vacant and are in a very poor state of repair.

Why is this?

Some of these properties are commercial properties and all buildings have a life cycle.

When new they are effective and efficient but they age physically and socially over the years.

A modern office building is designed very differently from the one that was built in the 1930s.

Young people probably won’t understand how different the working environment was just 30-40 years ago.

At that time there were no computers, no photo copy machines, no fax machines and no cellphones.

Everything was manual – making copies was done by adding extra pages into a manual typewriter with carbon paper inbetween.

Transportation was also very different.

Yes, there were cars but most people did not have one and travelled to work by public transport.

Thus, buildings had little or no parking.

The old UBS building on the corner of Hoffman Square and the mall in Bloemfontein is a 6000-square-metre six-storey building with only 20 basement parking bays.

The Cuthbert’s building opposite has none!

Such buildings have no attraction to modern businesses and are relegated to third-class status.

Having lower incomes, they are marginal properties that are not well maintained and, in many cases, do not generate any net profit income at all.

No wonder they are in the condition that they are in, especially as they can only attract the lowest and poorest class of tenant.

In reality many areas in town should be demolished and regenerated as modern areas to attract business back.

Having said that, the lack of control and enforcement of rules and regulations by council is to blame for many of the woes of city properties.

How can an active council allow buildings to stand in a semi-demolished condition without chasing the owner to fix them up?

Uncollected rubbish, unfixed lights and robots and potholes all tend to diminish the desirability of an area, resulting in lower rentals and a greater problem of deteriorated buildings.

We are now seeing similar problems with some residential buildings.

This is not usually in single residential buildings as when the area gets cheap enough, there appears a type of buyer that can afford to buy up these dilapidated buildings and improve them.

Wilgehof is a great example of this happening.

Built in the 1950s by the Department of Community Development, it used to be an area for poor people but because of its central position and new developments such as Saratoga, the area has grown in stature and improved immensely in condition.

This cannot be said of other areas such as Willows, where lawlessness is rife because of lack of enforcement by the metro.

This is one of the least safe areas in the city and nearly all the family occupants have moved away.

Sectional title legislation also has not made it easy to maintain some older sectional title blocks.

These are community living units with multiple owners.

Older buildings built before the 1980s are in many cases in need of major upgrades, including rewiring and modern electrical connections as well as replumbing of old rusted piping.

But owners have different reasons for owning these properties and there are often conflicts of interest.

One owner living there wants the building to be maintained to a high standard while a landlord owner is looking at the return he obtains and wants the levies as low as possible.

Most owners object to what is perceived as high levies which are necessary to collect enough reserves to be able to tackle these problems resulting in a continuous deterioration in the condition of these buildings.

Current law that makes it near impossible to chase owners who do not pay levies and tenants that do not pay rental and service fees just makes the situation worse.

Again, the difficulty in getting rid of bad tenants such as drug pushers kills most of these buildings.

The current state of the economy does little to make things better.

The high level of rates and taxes and lack of services tends to make it unprofitable for landlords and COVID-19 has reduced the demand for commercial properties.

Theft and vandalism in vacant buildings is a major problem that, combined with low demand, has resulted in many dilapidated buildings around town.

There is no easy solution but it would help if much of the red tape and bias was removed from the property industry.

  • 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

Bigger can be best

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MAJOR UPGRADE NEEDED . . . Many of the original sectional title schemes were existing buildings that were converted

I want to be very brief in this article so that those interested may have more time to think about my discussion point.

We have previously discussed shortcomings with the Sectional Titles Schemes Management Act (STSMA), which are many.

I want to focus on just two of them today.

The STSMA was signed into law and became effective on October 7, 2016.

Ideally, the STSMA was introduced in order to provide for the establishment of bodies corporate to manage and regulate sections and common property in sectional title schemes.

Its main purpose is to apply rules applicable to such schemes – establish a sectional title schemes management advisory council and to provide for any related matters.

The two biggest problems have been, firstly, the age of buildings that were converted to sectional title schemes and the size of many of the early schemes.

Buildings have a practical lifespan.

Many of the original sectional title schemes were existing buildings that were converted.

Some of these buildings are now approaching 80 years and need major upgrading – particularly piping and wiring – and modernisation and owners just don’t or have not made provision for these upgrades, especially in less affluent areas.

The second problem is that these schemes have a small number of units and are uneconomical for a managing agent to administer.

The reality is that the larger the scheme, the easier it can be managed.

I wonder if it would be worthwhile to have two schemes combining for admin purposes.

Food for thought . . .

  • 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. You can contact him via email: mike@platinumglobal.co.za

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Property

Fix and protect your building from rain damage now

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FIX ROOF LEAKS . . . Protect your building from rain damage

Last year saw some very good rains but this year has been exceptionally wet.

At regular times more than 50mm of rain was received in a single day.

We have just had some rains in Bloemfontein and the surrounding areas which have left the ground thoroughly soaked with open water lying around.

Lawns remain verdant green!

If your building was going to have any roof leak problems, I would suggest that it be fixed by now, though it is possible that there could still be damp problems.

Of course, the rainy season is well behind us now but we could still experience occasional rains during the rainy season.

I would really recommend that now is the right time to do a full building inspection.

Many of you will know of my dread of overgrown trees.

Well, this year they have grown like weeds – my pecan nut tree in the garden has grown its branches by nearly two metres this year!

Trustees could do well to investigate the entire property for overgrown trees that need to be trimmed and to make sure that none are leaning against buildings or walls.

Trees in gardens belonging to individual units should be attended to by those owners – after all they planted these trees or left them to grow.

It might be a good idea to have one contractor remove/trim the problem trees and share the cost if owners don’t have the time to do it for themselves.

But do it they must.

The cost of removing whole trees can be expensive but trimming must be seen as maintenance.

Also, check for damp in walls caused by overgrown flower beds – the best way is to ask owners and tenants to report any serious damp problems.

It’s also advisable to buy a set of drain rods and clear your drains, especially stormwater drains that can easily be blocked with soil or sand.

Check for water leaks as these could have been hidden by the wet conditions that we have experienced.

  • 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

Banks now hesitant to lend to property buyers

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BOND RISK . . . It has now become near impossible from a cost and time point of view for banks to sell a property in execution

Banks make most of their money when they lend to customers and charge interest.

That is essentially how they get money to run their businesses and generate profit.

In other words, no lending, no profit.

When a bank lends you money to buy property, it allows you to purchase a property that otherwise you would never have the money to buy.

It is the best investment you will ever make.

Over time, property values rise and you get the benefit, as banks don’t participate in your profit.

It used to be that banks lent 70-80 percent of the price of the property and you had to find the cash for the balance.

You also had to find the bond and transfer costs.

That means the banks risk was about 75percent.

So, if you defaulted and the banks sold the property as their security on the bond.

If they achieved 75 percent or more of the current market price of the property, they would get their money back.

But times have changed.

The Consumer Protection Act (CPA) and a whole raft of other “consumer-based” legislation have changed the situation.

While the CPA was introduced in a bid to “promote a fair, accessible and sustainable marketplace for consumer products and services and for that purpose to establish national norms and standards relating to consumer protection, to provide for improved standards of consumer information, to prohibit certain unfair marketing and business practices, to promote responsible consumer behaviour”, among others, it has brought with it some challenges.

It has now become near impossible from a cost and time point of view for banks to sell a property in execution – ie when a client fails to service their bond.

Just getting a magistrate to agree to the sale, despite the lender being years in arrears, is a nightmare and the costs involved are horrendous.

Further, bonds are mainly 100 percent nowadays, so banks are unlikely to recover the outstanding bond and interest.

Arrear levies and rates need to be paid by the buyer so the price achieved is often half of the real value of the property.

If it was my money, the last place that I would lend it would be as a 100 percent loan for somebody to buy a home.

Times need to change.

  • 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. You can contact him via email: mike@platinumglobal.co.za

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