Fine tuned collections

Propell, the sectional title collection and funding company that operates throughout South Africa, has this year achieved a 27% increase in the collection of sectional title levies that are in arrears - and a further improvement, says the CEO, Andre van Schaik, is on the cards for the year ahead.

Simone Sulcas, a Propell attorney (and a director of the company), said that the challenges facing an organisation like Propell have grown exponentially since the onset of the recession in the second and third quarters of 2008.  The difficulties, she said, are particularly severe when, having exhausted all other means of achieving repayment, Propell is forced to try and sell a property in execution.

“Before the downturn in the economy (and the property market),” said Sulcas, “it was relatively easy to sell a sectional title unit in execution and thereby provide a satisfactory sum for the repayment to both the bondholder and the body corporate.

“Since the recession, however, sales in execution have often been unable to achieve more than 70% or 80% of the property’s bonded value.  This is in most cases not enough to meet what is still owing to the bank, the levy arrears due to the body corporate and sums owing to other creditors.

“In the circumstances it is not surprising that the bondholders (i.e. the banks), who have the right to veto a sale (as was confirmed in the Geovy Villa case), are often reluctant to allow sales to go ahead, especially when they are still being paid monthly on their mortgage bonds.”

The banks, said Sulcas, have done excellent work in helping those in trouble with their mortgages to find new ways of paying and/or, where necessary, arranging for quick sales or rapid auctions to dispose of the property rather than to allow debts to continue to mount.

However, she said, where banks resist a sale in execution it is Propell’s experience that the situation usually continues to deteriorate further.

“When the property is finally sold off, all too often it achieves far less than it would have had the action been taken earlier and it was in a better condition.  We have to remind ourselves, too, that where the property is a sectional title unit, those suffering as a result of the unpaid levies are the other members of the scheme, who in the end will be forced to make up the shortfall.  This obviously is a very unfair situation.”

In South Africa, said Sulcas, the delays in bringing about a sale in execution through a court resolution have now reached 18 to 24 months and this very definitely exacerbates the problem and causes debts to rise further.

“Perhaps by now,” she said, “we should be looking at how the UK and US banks handle their problems.”

In these countries, said Sulcas, properties in arrears on bond payments are placed under ‘receivership’ which enables them to be sold within three to four months of the defaults becoming unacceptable.

“As a result of this quick action, the UK, and to a lesser extent the USA, are working through their distressed property problems fairly quickly,” said Sulcas.  “By contrast in South Africa we are only now in many instances really dealing with people whose defaulting dates back to the early 2008 period.”

What can Propell do when a sale in execution is blocked by a bank?

“The first point to be made,” said Sulcas, “is that for Propell a sale in execution is always a last resort.  We will use every other means at our disposal to get levy repayments caught up before we take court action.  There are other ways of collecting arrears.  For example, if the defaulter is employed we can attach a portion of his salary in order to expunge the judgement debt.

“We can also proceed with a financial enquiry and extract a court ordered monthly payment amount or in extreme cases obtain a sequestration order enabling a trustee to liquidate the debtor’s assets.  Here, too, however, the main creditor, the bondholder, can frustrate the sequestration process if he can show that it is not in his interest.”

Propell’s strength this year, said Sulcas, has been that they have fine-tuned their debt collection processes and this, as indicated, has resulted in far more efficient recoveries.

To achieve this, she said, it has been necessary to “bolster” many of the internal and Internet technology systems, with the result that today the ongoing liaison with debtors by letter, email, SMS, and telephone has resulted in improved collection efficiency.

“We have in addition to our own in-house attorneys and paralegal staff also been able to assemble a highly competent panel of attorneys who are experts in debt collection and who are paid on results, not, as previously, on the quantity of work done.”

In almost every case, said Sulcas, it is preferable to leave the defaulting unit owner in possession of his property and to make another arrangement for repayment.

“As a result of creative new thinking in this field,” she said, “I believe that Propell is now more effective and more popular than at any stage in its previous history.”

For further information contact Simone Sulcas on 021 657 3600 or email

Article by: Simone from Propell