Shortage of sectional title and developers should involve managing agents
It is no secret that, although demand for sectional title properties, especially those priced at ±R500 000 or less, is at an all time high, property developers are having great difficulty bringing such property developments to the launch stage.

Michael Bauer, general manager of the sectional title management company, IHFM, has said that a lack of bank funding is often the main cause for this.

“The banks citing the National Credit Act are now, in my opinion, knee-haltering this all-important development sector on the grounds that the risk is high – but every market survey has shown that the demand exceeds supply and that, with South Africans again learning to save, there are potential buyers able to pay up to 20 to 30% deposits to gain bonds for such schemes, and as most are in secure jobs, the chances of defaults are not high.”

Also holding this sector back, said Bauer, is the high cost of land.

“This,” he said, “is not always due to a desire for an excessive profit: some of this land was originally bought on a rising market at high prices and to sell it now would entail making a loss. However, if permission can be gained to increase the density of these proposed projects, many of these schemes can still be viable.”

When a sectional title scheme does get the go-ahead, said Bauer, property developers should bring the managing agent in during the planning stage.

“Years of managing agent experience in running such schemes can be useful to a property developer,” said Bauer. “All too often property developers are unaware of the practicalities involved in actually managing a sectional title scheme after the completion of the development. This can limit its success.”

Asked to give examples, Bauer said that he had recently advised property developers to install a swimming bath (to promote a community spirit), to realign an entrance gateway (to assist the security guards) and to install separate water and electricity meters (so that owners are accurately charged for their consumption and do not feel they are subsidising other owner’s tenants). He had, he said, also helped to draw up the conduct rules for the scheme.

“Among certain property developers,” said Bauer, “there is a remarkable lack of concern as to the performance of the scheme after the units have been transferred and handed over: this is short-sighted because any scheme in which the owners or tenants are dissatisfied will tarnish the developer’s reputation and make it difficult to sell unsold units still on the market as well as units in subsequent schemes.”

Where there are problems in the first half year of a scheme, said Bauer, a tactful, strong managing agent will help the developer handle these – so the sooner the managing agent comes on board, the better. This, he added, also applies to security estates with freestanding property where the agent reports to a Homeowners’ Association.

Article from: