These are the mistakes bodies corporate make that repel buyers
We recently received a question from Donald Steyn, an owner of a sectional title unit in Johannesburg. Steyn was unhappy with the security system at his complex and wanted to know what he can do to change it. This was his question.
“When I bought my property in 2011 the complex had great access control with two roaming guards always on duty; the guards would alternate as this was an outsourced duty. In 2016 the trustees passed a motion for the system to be changed. We no longer have guards and security cameras were installed. What has happened now is that theft from within the complex has become a problem. I very strongly believe that some tenants are here only to run this ring of housebreakers from within the complex. This would not be a problem if we still had roaming guards. Whenever this has happened I’ve asked for camera footage but it is always out of the camera’s vision or the particular camera is not working. What rights do I have and what steps do I need to take to force the trustees to reverse the decision to get rid of the roaming guards?”
While Steyn definitely has avenues available to him to change the situation at the complex and should take action to protect the value of his investment, this does give rise to an important issue: Would you buy in this complex? Probably not, right? And you wouldn’t want to be a current owner either, because issues with management of a complex such as the security system of Steyn’s complex, is the stuff of nightmares for homeowners and investors hoping to see capital growth in a property.
So what are the management problems potential buyers, investors and current owners should be on the lookout for?
Security is a big stumbling block for many
Grant Rea, certified sales and letting specialist at RE/MAX Living in Cape Town, says that, in his experience, the people managing the front desk or access gates to complexes or apartment blocks are often times the biggest let down to a complex or apartment block.
“In many cases, apartment blocks and residential complexes will charge levies to pay for services to manage the property,” he says. “These include the services of the front desk and security, so you want to make sure you are paying for a worthwhile service.”
Rea adds that new potential buyers should engage with the person on duty directly: “Ascertain their level of efficiency, find out whether they can answer specific questions about the building, access control policies and evacuation procedures.”
Rea has 4 questions you need to ask to make sure security at your building is up-to-scratch:
- What impression does the general feel of the front foyer entry gate or guard house leave you with?
- How easy is it for a non-resident to gain access to the complex or apartment block?
- How long has the staff been employed? Employees who have been there longer will be better able to spot suspicious activity.
- Is security outsourced or is it someone employed by the body corporate? If outsourced you need to do some research into the company.
Sticking to the rules is hard for some
Auren Freitas Dos Santos, legal compliance officer and property manager for Pam Golding Property Management Services, explains that many bodies corporate do not know or simply ignore the fact that they need to abide by the provisions of the Occupational Health and Safety Act.
“This act applies to all employers and workers, including workers employed by community schemes. Very often community schemes are not fully aware of their responsibilities towards their employees regarding the physical conditions of the work environment, the sanitary facilities, including toilets, bathrooms, showers, dining facilities, and the regulations relating to the use of machinery at a workplace.”
According to Dos Santos another problem that occurs far more frequent than one would imagine is unauthorised extensions of sections. “It is natural for homeowners to want to renovate and improve their properties, including increasing the boundaries or floor area of their apartment. Before proceeding to extend a section within a body corporate it is important to follow the legislative requirements to ensure that the extension has been authorised by the body corporate.”
A follow-on from this problem, according to Dos Santos, is the fact that some community schemes are quickly turning into a Smartie box of homes as owners change the exterior of properties as they please.
“I am of the opinion that the concept of harmonious appearance remains extremely important, not only to bodies corporate but to all community schemes in general,” explains Dos Santos. “Successfully promoting and protecting the harmonious appearance of a community scheme, while respecting each owner’s unique individuality within reason, can have a positive effect on the value and desirability of the community scheme.”
Jolene Alterskye, the sectional title specialist in Bantry Bay for Lew Geffen Sotheby’s International Realty, says that not sticking to rules can be a historical problem that will create dramatic problems for future buyers and sellers. When exclusive-use parking bays or other exclusive-use areas, like gardens, have not been registered in the deeds office nor in terms of the body corporate rules it always results in a problem.
“We have encountered a number of lengthy legal disputes whereby an owner purchased a parking bay when buying the property and he used the parking during his ownership but when time came to sell the property the parking was not transferred to the new owner as it had never been registered,” explains Alterskye. “This creates huge problems as the new purchaser will not take transfer of the property without the parking and obviously the price paid included a parking bay.”
All of these are factors of mismanagement of a complex, estate or apartment block, not only impacts on the value of the properties within the scheme but also the financial wellbeing of the scheme itself.
Finances and communication is a problem for others
Stan Rosenberg and Marc Wachenheimer, partner area specialists for Lew Geffen Sotheby’s International Realty in Morningside, Strathaven and Sandown, say that a rundown complex exterior can severely affect a seller’s chance of selling – in more ways than one.
“If the complex needs maintenance or is being neglected it is very possible that a special levy will be introduced to fix the problems,” they say. “Savvy buyers will realise that on top of the standard levies owners are already paying this can become costly.”
Roseberg and Wachenheimer agree that unclear communication and transgressors of body corporate rules not being dealt with timeously and effectively are other clear signs of problems with the management of the scheme.
Megan Milne and Justin Nortier, sectional title specialists in Rondebosch, Newlands, Rosebank, Claremont Lower, Kenilworth Lower and Mowbray for Lew Geffen Sotheby’s International Realty, second this.
“We have noted a few times that bodies corporate are not active enough on a daily basis within the complexes. For example, ensuring that no loud noise after a certain time in the afternoon or evening is permitted, or ensuring that owners/tenants do not leave their rubbish in common areas etc. These are examples which are immediate deterrents for potential purchasers who are looking to buy into well-maintained complexes.”
Dos Santos empathises that poor financial management of the scheme is easily the biggest headache for property managers, as it not only makes a property manager’s life very difficult but also impacts on the value of the scheme.
Rosenberg and Wachenheimer recommend asking these questions to help you determine the financial state of a scheme:
- Are the financials up to date and have they been audited correctly?
- Is there a positive balance in the pot so that there is enough money to pay for any unforeseen problems in the complex?
- Are the levies being collected timeously?
- Are owners who don’t pay levies being reigned in and charged interest on late payments?
It’s as simple as access
It’s not all bad, says Martin de Necker, broker/owner of RE/MAX All Stars, Alberton office, who believes that, in his experience, 90% of complexes are run smoothly from day to day.
In most cases mismanagement occurs when bodies corporate forget the simplest of rules, believes de Necker.
“Many bodies corporate tend to forget that all parties involved need to have access to a set of rules that lay out the functions and powers of the body corporate and HOA, which needs to be registered at the Deeds Office. This list will iron out most of the disputes that can arise between homeowners and the body corporate itself,” explains de Necker, adding that limited accessibility of the managing agent or HOA is another problem that occurs far too often.
Having limited access to managing agents or too many trustees all trying to make decisions can cause frustration or, worse, a lack of knowledge for the homeowner which, says de Necker, is at the root of the cause of most issues homeowners, sellers and investors might experience.
Being aware of any issues with the management of a scheme is not only a necessity for potential buyers into a scheme, but arguably even more important for a current owner. It is important to know what questions to ask and what signs to look out for to ensure the ongoing growth and value of your property investment.