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Property 24/10 - 45

3 February 2011

Estate agency trust debate continues
The recent revelation that the CEO of a national estate agency may have been able to use substantial trust deposits for purposes other than those intended by the depositors, has sparked a debate in the real estate sector as to whether any estate agency should be allowed to operate a trust account on behalf of clients.

Discussing this, Sean McCauley, Rawson Properties' director based in Johannesburg, said that he cannot see why estate agencies should be allowed to be in control of client trust deposits.
"In our group," he said, "the sale agreement specifically states that we do not hold deposit monies on behalf of clients - we advise putting deposits in the conveyancing attorney's trust account - but it has to be admitted that attorneys' trust accounts have on occasion also been abused. It is time, therefore, that the whole system was reviewed."
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Joburg City sends resident R200m bill
The huge R202 841 609 bill sent by the City of Joburg's debt collection agency to Richard O'Flaherty appears to be his account number rather than the money owed. Now In-Quest, the debt collection agency has admitted it made a mistake sending out 100 bills that were incorrect.

The highly inflated amounts reflected in these bills appear to be the residents' account numbers that have been confused with the amounts owed.

Inexplicably the City of Joburg has recently changed the addresses of some of its residents and Michael du Plessis of Berea who was also hit with a municipal bill for R206 861 099 (again its almost the same as his account number) has now had his street number arbitrarily altered from 28 to 32.
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Consumers at the mercy of auctioneers
The recent clampdown by the Estate Agency Affairs Board on members who have not been acting ethically and have allegedly been defrauding trust funds highlights a long-standing problem with auctioneer's trust monies, says Auction Alliance CEO Rael Levitt.

According to Levitt, auctioneers who sell fixed property are governed by the Estate Agency Affairs Act, and therefore provide fidelity fund protection for their trust funds, but no legislation exists for movables trust money.

"If one includes motor vehicle sales, livestock, art and high-value machinery, billions of rand moves through auctioneers' accounts and they are completely unregulated in this regard."

The reality is that, despite a few rogue operators, the real-estate industry is well regulated, with a host of laws for the protection of consumers' deposits, Levitt says.
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Buffer zone for Cape Town's coast
Draft legislation from the City of Cape Town seeks to prevent any further development along 300 kilometres of the Peninsula's coastline. The buffer zone will vary from about 100-metres from the high water mark to as much as a kilometre.

The aim of this legislation is to prevent new development encroaching on the coast, which the city says is unsightly and often restricts public access to the beaches and the oceans.
Cape Town is the first city in the world to attempt to create a no-go zone to protect its coastline.

According to Gregg Oelofse, head of environment policy and strategy at the council, the new legislation ties in with the national government's Integrated Coastal Management Act.
In terms of the draft legislation no more housing or private developments could be undertaken in the buffer zone and changes to the land usage will not be permitted either.

He says that rights granted up to November last year will be respected but all new developments from that date will be declined if the council approves the draft legislation.
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Tough rental market in Cape Town
While office rentals in Cape Town might be in the doldrums, JHI property services group has renewed leases for some 75 000 sqm of space in the city. The leases have a total contract value of R215-million.

JHI is marketing office accommodation in this prime-located building, 2 Long Street, in the heart of Cape Town's vibrant city centre.

According to Marius Basson, JHI's regional director for the Western Cape, there is now an air of increased optimism in the market, which might convert into a higher level of activity and increased office rentals.

"Pressure on consumers has eased with the strong rand affecting prices on durable goods and lower interest rates, coupled with fewer job losses, will have a positive impact on consumer spending patterns" he says.

"We are seeing a growing level of interest in retail space mainly in the lower income areas such as the Cape Flats," says Basson.
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Homeowners need a reprieve
Struggling homeowners who are battling to meet mortgage repayments should be given some financial support by the government claims Tony Clarke, managing director of Rawson Properties.

Various support measures that have been successfully used in other countries including tax relief for buy-to-let investors, raising the capital gains tax exemption threshold on primary homes and allowing interest-only bond repayments for a specified time.

"While it is true that governments should not support an inefficient banking sector, it is also true that rescue measures implemented in Europe, Britain and Australia might be needed to assist homeowners in South Africa," he says.

Support measures that have been successfully used in these countries include:
- Tax relief for buy-to-let investors, especially for those who cannot find tenants;
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Rates - Durban wants its money
Independent schools in Durban have been branded as "businesses" by the council, which has now refused to give them the benefit of lower rates based on the national regulations which cap rates for "public benefit organisations".

The schools claim that they should be rated as public benefit organisations - as they are in other parts of the country - but the eThekwini council is refusing to budge, claiming that the independent schools are run as a business and should pay business rates.

The schools intend to apply to the courts for an interdict that will effectively force Durban to change its tariff structures. Should the schools not succeed then they will have to increase their fees through a special levy or may have to scrap all bursaries to students.
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Renovating - tell your insurers
Anyone who is planning to renovate their property should keep their insurance company informed each step of the way according to Craig Young, national manager of ooba, the bond insurance company.

Recognise the risks of under-insurance and make certain that you inform your insurance company before you renovate.

"When making trivial changes, such as repainting a wall, it's obviously not necessary to tell the insurance company but when you are doing any structural work it's essential to keep them informed," says Young.
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Foreigners buying property dwindling
The number of foreign investors buying residential property in South Africa has dwindled noticeably.

The number of foreign investors buying residential property in South Africa has dropped, as has buying second homes reflecting tough economic conditions.

FNB's latest Estate Agent Survey shows that foreign buying represented only 2% of total housing sales in fourth quarter 2010, the lowest level on record since the FNB survey was launched in 2002.

FNB property strategist John Loos says in 2008 and 2009 some 4% to 5% of all housing sales still went to foreign buyers. Loos cites the global recession and ongoing financial stress in many parts of the world, Europe in particular, as a key reason for the drop off in foreign demand.

Currency fluctuations also play a part. Says Loos: "The UK has traditionally been a major source of foreign buyers for SA. And a significantly weaker pound, coupled to a stronger rand, means British investors are now getting less house for their money than a year or two ago. Residential property has also lost favour globally as an asset class."
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