The importance of professional property management

What difference will a professional property manager make to your residential community scheme? Annetjie Terblanche, head of property management at Terblanche Properties, explains.

Warning: Body corporate without water and lights

Make sure your body corporate keeps its lights on

Trustees and managing agents must ensure that they collect enough money from members to keep the water and lights (and other services) connected.

The Supreme Court of Appeal recently dismissed an appeal brought by a body corporate in Durban against a judgment of the KwaZulu-Natal High Court, which held that a municipality may terminate a ratepayer’s water and electricity services based on an outstanding debt for municipal rates.

The court found in this case that the municipal rates bill was in arrears simply because of the body corporate’s admitted failure to impose levies on its members and collect from them a sufficient amount to enable it to pay the municipal charges (A copy of the judgement can be seen here.) A body corporate has a legal obligation under the Sectional Titles Act to impose levies on its members and to collect them to enable it to pay its expenses.

The SCA held that the Local Government: Municipal Systems Act empowers a municipality to terminate a ratepayer’s water and electricity services to enforce payment of arrear rates.

This judgement has important consequences for bodies corporate. Trustees and managing agents must ensure that levies are raised, imposed and collected from members. Levies are the lifeblood of any sectional title scheme.

Contact Terblanche Properties today for expert assistance and professional management services to ensure that your body corporate keeps its lights and water connected.

Rental market looking stable

Rental payments must be managed

First quarter 2011 results released by TPN shows that 81% of tenants are in good standing with their rental payments. A tenant is in good standing when the tenant pays the full amount of the rental either on time or a few days late. Comparatively speaking, tenants are paying better in 2011 Q1 than the same period last year when only 78% of tenants were in good standing.

While it may be too soon to draw major conclusions from the data, it does seem as if tenants have learnt to budget better. The stable inflation rate environment and low interest rates may also be playing a role. South Africans have had to tighten their belts, and it seems we have done so.

The rental bracket between R3000 per month to R7000 per month still proves to have the best paying tenants with a full 84 of them in good standing. The bracket between R7000 and R12 000 follows closely with 82% of tenants in good standing. Tenants in the categories below R3000 and above R12 000 per month have further deteriorated to 75% and 74% respectively. Tenants in the Western and Eastern Cape continue to pay better than those in Kwazulu Natal and Gauteng.

We have always felt that the choice of letting agency is just as important as the choice of tenant. Make sure that you deal with a company with a proven track record and a valid fidelity fund certificate. As one of the leading letting agencies in the Garden Route, it is great to know that tenants placed by Terblanche Total Property Solutions are paying far better than the national averages. More than 98% of tenants placed by us are currently in good standing.

Wouldn’t you like to have those kind of statistics in your favour?

How to set a body corporate budget

So you own a unit in a sectional title complex and those levies just seem to go up and up? Bearing in mind that petrol prices and interest rates seem to race each other to the top, it is understandable that people will question all their monthly expenses, including levies. This post may clear a few things up for you. It was posted in propertysouthafrica on October 28th, 2007.

“Whether we like it or not running a body corporate is like running a business”, so says Mike Spencer of Platinum Global in Bloemfontein.“Running a company needs proper planning and budgeting. To run a body corporate properly trustees need to plan what they are going to do during the forthcoming year (the year runs from the beginning to the end of the new financial year). What would they like to do (painting, major repairs, waterproofing etc) and do they have enough money in the reserve fund to be able to tackle these projects or will a special levy be necessary?”

Spencer says that In order to finance the normal running of the building and pay for any special projects the trustees need to budget carefully for each and every expense item on a month to month basis.

Why on a month to month basis? Spencer explains: “expenses do not stay the same right through the year. For instance municipal charges are usually increased in line with the local authorities’ budget – July for Bloemfontein for instance. Salaries need to allow for Christmas bonuses and relief workers.

“Most important is to have a realistic reserve fund allowance (usually expressed as so much per unit per month). Ideally trustees should get a rough quotation for undertaking the major repairs and maintenance which will have to be done in the future (after the current year’s budget) but this is often difficult because creating quotations cost a lot of time and effort by contractors and they are very reluctant to provide such quotations when they know that they are not going to be accepted.

“Trustees should estimate the current cost of such repairs and when they are likely to have to be done. By dividing the estimated costs by the number of years until they need to be done each expense will relate back to an amount that needs to be collected in the current year’s reserve. It is a good idea to actually have separately estimated amounts for each item as this makes it more clear to everyone why the reserve needs to be provided. Each item would be budgeted as 1/12th of the amount each month.

“The simplest and easiest way is to use a spreadsheet to calculate your levies. Have a column for each month of the year and a line for each expense. Group expenses by type such as municipal expenses (rates and taxes, water, electricity), maintenance items (maintenance, security, wages etc), and administration costs, (managing agent’s fees, bank charges, newsletter costs, audit fees). Each line should automatically provide an annual total, and each group should have a group total as a check.

“The total of all the expenses will give you the total annual levy. Divide this by 12 to give the monthly levy that must be collected to provide the running expenses for the body corporate.

“The owners, based on their participation quota, will then share this monthly amount. The new levy should be collected from the start of the financial year. It is a good idea for all owners to be invited to the trustees budget meeting so that they fully understand how the levy was calculated and to assist in accepting each budgeted figure. Practice has shown that far fewer complaints about high levies are received if all owners have an opportunity to be involved in the setting of levies.

“Most importantly the levy should never be changed just because the levy “seems too high” or “the increase is above the inflation rate”. Budgeting is a way to ensure that the body corporate is well financed and has money to do the things it needs to do, when it needs to do them, without, as far as possible, having to resort to special levies.”

At Terblanche Thomas Property Solutions we are experts at setting body corporate budgets. We understand how to run it like a business with proper cash flow and expense management, which basically means less worries for you. Leave it to us and we’ll help your investment grow faster than the interest rate or inflation.

Looking at levies

Cash is the life blood of any business, just ask any business owner. Similarly, a body corporate, which is responsible for the management of a sectional title scheme, also needs cash. It gets that cash in the form of levies. Then, like any other business, it pays expenses such as payments to the authorities for taxes and utilities and payments to service providers such as the cleaning company. This is slightly simplistic but it gives you an idea that levies are the lifeblood of a body corporate.

When the budget is done each year, the body corporate needs to make sure that budget makes provision for all the expenses that are necessary to keep the complex in good order and condition. If not, it will directly and negatively affect the value of everybody’s investment. Remember, we are talking about people’s homes, which are often the biggest investment they will ever make. The body corporate will approve such budget and the trustees will pass a resolution to give it legal effect. Thereafter, each owner will be liable for a levy (usually monthly) which is based on his participation quota. This is basically the size of his unit in relation to the total area of the complex.

Levies are not like normal debts. It has to be paid in full and on time so that the expenses of the body corporate can be paid on time. If levy payments are late, it basically means that those who paid on time are subsidising those that did not pay on time. Imagine the bank asks you to help pay your neighbour’s bond – this is similar! If it goes on for while, the body corporate will be unable to pay its expenses such as rates and taxes. The municipality will then be able to come and claim that unpaid amount from all the owners in the complex – even if you paid your levies!

There is much more to this topic and we will touch on it again in future. At Terblanche Thomas Property Solutions we have a strict approach when it comes to levy collections. It is in your interest that everybody pays the right amount on time. We make sure they do. Isn’t it great to have someone look out for you for a change?