Problematic Sectional Title Schemes

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It is often thought that when the trustees of a sectional title scheme decide to take on the services of a levy finance management company, that the managing agents are then ‘pushed aside’ but in many cases, having the three separate entities sorting out the relative problems in the scheme works well as each party can concentrate on the jobs that they do well and
are important to fix.

Len Sack of Property Management Services in KwaZulu-Natal, says “the combination that works well is one where the levy collections are given to a company that is dedicated to doing that, to ensure that the income stream is steady and that those who do not
pay are dealt with accordingly.” “This leaves the managing agent to do his job, which
is to ensure that the day to day running of the scheme is done efficiently and properly,” he adds. “Collecting levies in a sectional title scheme is often problematic, in that many do not pay on time and some do not pay at all. If the trustees have to try and collect levies on their own it often leads to friction within the scheme as a neighbour and possible friend becomes the debt collector. Having managing agents to do this sort of work is preferable to the trustees doing this themselves, as a detached view on the matter is needed and managing agents are there to ensure the efficient running of the scheme, and not to get personally
involved.”
However, if there are many who are not paying their levies, the managing agent sometimes has to call in the services of a levy finance management company to sort out the problems with collections and the finances of the scheme. Of the problems encountered in bringing in money for the scheme, one of the biggest problems is that it is often a very slow process to attach units in the case of an owner not paying his levies. This leads to a loss of income that needs to be covered by the others in the scheme, while they await the sale of the unit. Another major problem encountered is where funds have been misappropriated, leaving the scheme in dire financial difficulties.

Using the various options available, such as levy guarantees, arrear funding, a project loan or an overdraft facility, helps the managing agent immensely in getting the scheme back on its feet and making sure that the maintenance and repairs needed are caught up and kept
up to date. In this way, scheme maintains its financial stability and its property value.

Having each entity focus on the job they are assigned to and not having to deviate to other tasks, ensures that the whole system of running a sectional title scheme is efficient and beneficial to all.

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