Advice and Opinion

Many sectional title schemes might not realise a loan is an option

There are often cases where sectional title schemes run into some financial difficulty, where there is a large proportion of the levies due in arrears or where they are having difficulty collecting the levies in full, and then to exacerbate matters there might be urgent maintenance or bills that need attending to. In cases like these bodies corporate are able to get financial assistance in the form of arrears finance but the trustees may not have realised that this is possible, says Mandi Hanekom, operations manager for Propell.

There are many questions asked, many might ask what arrears finance is, how much cash could be made available to any sectional title scheme, and how to go about getting it, etc. While a body corporate cannot apply for an outright loan at a bank, there is another option available, arrears finance or loan through Propell.

Arrears finance is where the body corporate allows Propell to take over the debtors’ book (this would be the debtors with balances greater than R3 000), i.e. the collection of the levies from owners, and in return offer a loan to the body corporate to take care of urgent matters. The body corporate can borrow according to the size of the scheme and what levies are collectable by Propell (which is worked out on a scheme to scheme basis) and no trustees have to sign suretyship for the loan. All that is required is that Propell take over the arrear and future levy collection for the body corporate until the debtor pays his account, says Hanekom.

Propell will fund the monthly levy of the defaulting owner to the body corporate, if the total balance is within the limit set on that property. If there are new owners defaulting, with an arrear balance greater than R3 000, Propell can take those over as well, she said.

The loan, in turn, is repaid to Propell via the amounts they manage to collect from defaulting owners. If there are any legal fees incurred in collecting outstanding amounts from defaulters, Propell covers the legal costs in individually funded units. (The legal fees are then recovered from the defaulting owner.)

If a levy clearance certificate is needed during the time that Propell are contracted to the body corporate, the managing agent will still be responsible for issuing the certificate but consent is required from Propell as they are collecting funds from individual units and will provide accurate and complete clearance figures.

“When it comes to day to day management and the overall running of the scheme, Propell prefer not to interfere with the managing agent’s job, which is to ensure that the scheme is run properly. What we assist with is ensuring that he can do his job efficiently by making sure there are enough funds available and coming in steadily for this to happen. An efficiently run scheme, in turn, ensures that the property values remain intact and that the owners are living in a financially sound sectional title scheme,” she said.