Throughout South Africa a very high proportion of sectional title and other residential property schemes controlled by body corporates or home owners’ associations are experiencing financial difficulties (due mainly to levy arrears and/or poor budgeting). Such schemes have usually also been very inadequately maintained and ultimately their units almost always lose their value.
“The figures of schemes in trouble,” says Johann van der Merwe, the Rawson Property Group’s Somerset West franchisee “have been put as high as 35% and it is known that over 25% of schemes have seen properties repossessed, while perhaps another 7% have been declared completely bankrupt. Until recently, I have to say, the situation was not much different in the Helderberg region.”
However, a property management company formed by himself, with Chantel Landers as portfolio manager and, more recently, his son Danie as manager, has in the four years since it was founded shown that achieving total turnarounds of debt and poor maintenance situations in the schemes referred to is achievable in every case provided the right methods are employed.
Van der Merwe said that if the Rawson Helderberg team is appointed to manage a sectional title or home owners’ association scheme they then apply a business model in which the owners/members are treated as shareholders, the trustees are regarded as the directors and the Rawson team becomes the management.
“As managers, we accept full responsibility for the management of the scheme, including the levy collections, the chasing up of bad debts and the control of the teams handling the gardens, the maintenance, the security and other such operations associated with the project. The body corporates/home owners’ associations however continue to pay such people.”
Initially, said van der Merwe, the seriousness of the problems encountered by his team in the schemes handled led to fairly slow growth of the company, however since 2012 they have been growing almost exponentially. Today, he said, his team of five manages eight schemes with over 1,000 units and every one of these has within a few months been turned from a loss to a profit situation.
“They all now have cash reserves and they are all debt-free,” he said.
These turnarounds, added van der Merwe, have had an exceptionally good effect on all the schemes: the appearance of the buildings is greatly improved, vacancies tend to be significantly reduced, rents rise steadily, the percentage of owner-occupiers increases radically (something the Rawson Property Group always encourages) and the atmosphere among the residents becomes more friendly and congenial. Most importantly, he said, the values of the units themselves instead of sinking, now start to rise.
“One of the lessons we learned in achieving turnarounds is that it is important to eliminate bad tenants,” said van der Merwe. “Experience has shown that often it is the late payers who subsequently become the non-payers. Once late payment occurs, and non-payment seems likely in the future, we stand by to take immediate action – and we can usually evict a non-paying occupant within three months.”
Good tenant selection, added van der Merwe, is also crucial to the success of sectional title schemes and his team will insist on analysing the credit and other records of potential tenants before the owner is allowed to sign leases with them. In the process up to 40% of prospective tenants will be rejected.
The success has also, said van der Merwe, led to a strong demand for the company’s services. The management team is now negotiating to manage a further 1,600 and 1,200 of these and the agreements will probably be signed within the next few months. The expansion drive is being managed by Danie van der Merwe, who joined the company in September 2013.
The Rawson Property Group’s Helderberg property management team, as indicated, is now aiming for huge growth. This, said van der Merwe, will mean that they have to spread their net wider and they have, in fact, been given the right to search for new business throughout the Boland and the Overberg and initially will be targeting schemes in Stellenbosch, Paarl and Wellington.