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Property 24/10 - 141

31 January 2013

HOAs and the end of transition period
What does the end of the transition period for compliance with the new Companies Act mean for Home Owners' Associations?

The new Companies Act provisions to do with directors’ duties, conduct and liability, members’ rights to receive notice or access to information, directors’ and members’ meetings and the adoption of resolutions automatically applied from 1 May 2011.

Any other provisions of the company’s memorandum of incorporation (MOI) that were in conflict with the new Act still applied, but only for the length of the “transition period”, which ends on 30 April 2013.

The imminent end of the transition period has prompted panicked questions about what non-profit HOA companies have to do before May.

Any provisions of the HOA’s MOI that are in conflict with the new Act will automatically be void and of no legal effect from 1 May 2013. The same applies for any rules or members’ agreements made before 1 May 2011 that conflict with any unalterable provision of the Act. If the HOA wants to retain any provision that relates to an alterable provision of the Act, the MOI has to be changed before the end of April or that provision will cease to apply.
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Separating and joint bond - options?

A Property24 reader asks:

A friend is in a traditional marriage with a joint bond and they are in the process of separating, however, her partner refuses to sell the house. 

Are there options my friend can explore? 

Gustav Zwiegelaar, Regional Manager at SA Home Loans in the Western Cape, advises:

When a loan is extended and a bond registered the parties involved are held responsible for the loan until such time as the bond is cancelled and the loan is settled. The reader is in a difficult situation as there is very little one can do once a property is jointly owned and the bond is registered in the name of both parties. Should either one of the parties cause the bond to go into arrears through non payment both parties suffer a degeneration in credit worthiness and both are held responsible for the outstanding loan amount plus potential interest. It is thus of absolute importance that the bond repayments are honoured. 
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How long for my rental deposit refund?

A Property24 reader asks:

What is the maximum time a landlord has to refund your deposit after premises has been vacated? If all is in order. 

David Beattie, principal of Chorus Letting, a Cape Town based specialist residential letting company, advises:  

The Rental Housing Act is very clear on the terms on which a deposit must be repaid. The period in which the landlord is obligated to refund the tenant’s deposit is determined by whether or not there is any damage to the property and if the tenant attended the move out inspection. These terms can be summarised into three main periods: 

  • Should there be no amounts owing by the tenant to the rental agent or landlord either for monies owing and unpaid in terms of the lease agreement, the landlord shall pay the full amount of the deposit plus any interest thereon to the tenant no later than seven days after the termination date, not including weekends or public holidays.

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What landlords need to know
With the ever growing demand for rental properties in the current market, many opportunities have presented themselves for property investors with rental portfolios or those wanting to purchase their first buy-to-let property.

This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who says although many rental properties are yielding good returns on investment, it is important that potential landlords consider a few aspects before venturing into the property rental game because as with most investments, purchasing a buy-to-let property is not without its risks.

Affordability and the financial risk

According to Goslett, the first step for an aspiring landlord is to consider what they can afford financially, bearing in mind that there may be some months that the rental property stands vacant.

He says it is important that the financial implications are measured and that the landlord is not reliant on a tenant occupying the property at all times. 
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I can afford home loan - credit score!

A Property24 reader asks:

I qualified to get a home loan but I was declined  because of my credit profile. They say I have got many commitments, but I know I can afford to pay monthly instalments - I did the calculations for the  home loan. The problem is that my  accounts are not cleared but they are fully paid.

So can you tell me what steps to take to rectify my position and how to check my credit profile? 

Gustav Zwiegelaar, Regional Manager at SA Home Loans in the Western Cape, advises:

Lending institutions consider affordability very carefully when assessing whether a home loan may be granted. During the assessment process net income is considered against expenses reflected in the banking account statements and personal credit report. The exact amount ascribed to monthly expenses can sometimes be in dispute. Lending institutions can only work with the information at hand. 
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Bright spots in development market
While the market in residential property developments has slowed and many of the smaller borderline developers have all but disappeared in these lean times, there have been ‘bright spots’ in the market, and indications are that the development market is in the process of a gradual recovery. 

This is according to Pam Golding Properties (PGP), Hyde Park region development manager, Peet Strauss, who saysrecently they have seen a marked increase in activity from developers who are achieving good value from rentals. 

He says in the past many of these developers would have focused exclusively on selling their properties.

Now they have shifted focus and are taking a long-term view in this regard, he says. “The buoyant rental market has encouraged a number of creative, smaller developers who were unable to weather the challenging times to look for new opportunities to re-enter the market.” 

Jonathan Davies, PGP joint area manager, Hyde Park office, says developers are increasingly talking of ‘developing to hold’. This means that the developer will develop a property and sell as many units as necessary for it to be sustainable over the short term. 
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The 5-year rule for buying property

The property market will always fluctuate and go through different cycles, but there are certain rules buyers can follow to ensure they will make a healthy profit in the long term. 

It’s time to the revisit the five-year rule for buying a home, says Richard Gray, CEO of Harcourts Real Estate. 

Speaking after the release of FNB’s first Property Barometer for 2013, which shows that the average house price in South Africa for 2012 as a whole rose by 5% compared with 2011, Gray said home buyers needed to take a longer term view than they had since the country’s real estate boom, which peaked in 2008. 

“FNB reports a slight improvement on the average house price growth of 2011 (3.3%), and is expecting property’s appeal as an asset class to continue improving as the year unravels,” says Gray.  “This is indicative that the market is moving in the right direction and supportive of the traditional appeal of property as a strongly performing asset class over the long term.” 

However, he stresses that the key to making money out of real estate is in holding it until it has built up enough to make a profit when it comes to selling.  

“Post-boom, property has to be viewed as a medium-to-long-term asset class rather than a get-rich-quick investment vehicle, hence the validity of the five year rule.  
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