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Property 24/10 - 167

1 August 2013

Vetting process: find the right tenant
Letting and managing a property requires a lot of time and commitment, therefore it is of critical importance that a landlord selects a rental agent who is fully compliant with the vetting process. The objective of the vetting process is to empower the rental agent to make an informed decision on behalf of the landlord as to the calibre of the prospective tenant, to be certain of the ability of the tenant to pay their rental to the landlord and for the rental agent to establish a good relationship with the landlord.

Marlon Shevelew, director of Marlon Shevelew and Associates Inc, a firm specialising in Landlord and Tenant Law and Contractual and Consumer Law, says that incoming and outgoing inspections are  essential and compulsory actions that allow for the deposit, upon expiration of the lease period, to be used to fix any damages to the property caused during the lease. 

"The deposit itself is an amount which is held by either the agent or landlord as security that the premises will be restored to the landlord in the same condition as at commencement of the lease, except for fair wear and tear.”
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Homeowners' Association insurance
Insurance in gated communities and security estates, if run by Homeowners’ Associations, and not as sectional title schemes, is sometimes overlooked because they are not governed legally by any act which stipulates that this must be in place. This is according to Johann le Roux, executive director of Propell, who says in sectional title schemes body corporates have to, according to the Sectional Titles Act, ensure that all common and public property is covered by an adequate insurance. 

He says HOAs also need insurance for all common areas shared within the development. When it comes to common property insurance, the HOA must make sure that all areas, physical buildings and structures open for communal use by the members living within the HOA, are insured against damage and public liability.

Each of the individually owned properties within the HOA, however, must be insured by the homeowners at their own expense. 

HOAs should have a recorded Master Register within their constitution, clearly listing the common areas and structures that need to be insured. This is to be kept for future members of the HOA who might need access to this information, because, as people move on, there might be certain aspects of running the HOA that have been miscommunicated or forgotten. This register eliminates the risk of that happening, says le Roux. 
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Joburg clearance certificates an issue
Estate agents who rely on commission are facing a major financial crisis because of the lengthy period it takes to get clearance certificates from the City of Johannesburg council to facilitate property sales. Fred Steffers, managing director of Apex Property Brokers, says he and many of his fellow estate agents have suffered substantial losses because of their inability to conclude sales. 

He says they have had instances where it has taken upwards of eight months to get a clearance certificate from the council, which means that the property cannot be transferred from the buyer to the seller in the Deeds Office. 

“This is largely due to the incompetence of staff at the Braamfontein  and other service centres where staff are inadequately trained and motivated to deal with queries.”  Steffer says after standing in lengthy queues for hours, hard-pressed consumers are given a reference number. Often the queries are incorrectly logged and absolutely nothing happens, he explains. 
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Home loans for affordable housing
Mike van Alphen, the National Manager of Rawson Finance, has welcomed the advent of Housing Investment Partners (HiP) to the South African residential sector.

Old Mutual and the National Housing Finance Corporation (NHFC) are shareholders of the organisation, which has stated its goal is to help potential first-time home buyers enter the affordable housing sector earlier than is currently the case (‘earlier’ is defined as anything up to five years).

According to van Alphen, the home loan devised by HiP will be suited to the lower-middle income housing market where a monthly salary of between R3 500 and R20 000 prevails and where house prices range from R200 000 to R550 000.

He says that below this level, first-time home buyers qualify for fully subsidised homes and this eliminates the need for financial assistance. However, in this subsidised market, the pace of housing delivery is still slow and there are currently limited resale opportunities.

Van Alphen says HiP will target, in particular, employers who are prepared to offer their employees assistance in obtaining a home. The public and mining sectors will be high on the target list, as well as accredited private sector organisations, especially those listed on the JSE Securities Exchange.
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Interest on rental deposits
Traditionally, most rental agents have paid the interest accrued on tenants’ damaged deposits while in their trust accounts, back to the tenant, but they actually need to check their lease agreements before doing so.

This is according to Annette Evans, regional manager of the Institute of Estate Agents, Western Cape.

If the lease agreement used does not give a clear instruction as to where the interest should go, there is no obligation to pay the interest on these deposits back to the tenant but this interest amount does, however, get split between the agency who holds the trust account and the Estate Agents Fidelity Fund.

This is an issue that was brought up recently by an agent who, after many years in the industry, had automatically refunded the deposit, along with the interest, back to the tenant.

Pierre Olivier of the Estate Agency Affairs Board (EAAB) was asked to clarify matters and he referred to the provisions in respect of interest on monies held in trust, which is set out in the Estate Agency Affairs Act, 112 of 1 976.

In essence, Olivier says, the provisions state that all interest earned on monies held in trust (Section 32(1)-accounts) or savings or other interest-bearing accounts (Section 32(2) (a)-accounts), which have not been specifically nominated for the benefit of a contracting party (in respect of a lease or sale agreement) or stipulated in a mandate, is payable to the Estate Agents Fidelity Fund.
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Sectional title levy payment due date
A case cropped up recently where an owner of a unit thought that his levy account was only due on the sixth day of each month and there are probably many owners who think that payment of their accounts is only due by the seventh of each month.

This is according to Michael Bauer, general manager of IHFM, who says the truth is that payments of levy accounts are due on the first day of each month, payable in advance as resolved by the trustees.

He says in all cases the ordinary levy amount remains the same for twelve months, it does not vary from month to month, and this payment is due on the first day of each month. The trustees are not obliged to invoice the owners of units prior to the payment date but only have to provide a statement of account with payments made receipted on the statement.

However, the trustees in sectional title schemes cannot take the law into their own hands by disconnecting services or disallowing access to the complex if payments are not made, he says.
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Joburg rental property in short supply
There is less than a one percent chance of finding a decent flat to rent in the Johannesburg inner city, as vacancies hit a historic low and pave the way for a new surge of investor interest in the precinct.

. Andrew Schaefer, MD of Trafalgar, the national property investment and management group, says the situation has arisen from a steady improvement in vacancies over the past 18 months. This followed an oversupply bubble two years ago when around 2 500 units of commercial conversions were released into the market over a short space of time.

He says the vacancy impact was most marked in bachelor and one bedroom units, and this oversupply has taken about a year to be absorbed.

For the inner city of Johannesburg, two bedroom units are in high demand, renting from R3 000 to R4 500 a month, depending on size and area; investors can expect yields of 11 percent to 15 percent. Areas such as Yeoville, Berea, parts of Hillbrow and the Residential Improvement Districts tend to command the highest rentals. The trick is to spot an emerging good area and invest at the start of an upturn, says Schaefer.
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