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Property 24/10 - 96

23 February 2012

Can they stop me working at home?
A Property24 reader asks:

I have been living in a sectional title unit bought off plan since 2006. Can they stop me working from home?

I have been working from home for the last 2 years with no problem. I do not have clients at my residence, but have a delivery from the courier now and then. My neighbour works from home, but she has clients coming in and out.

A SGM meeting will be held in March and one of the points on the agenda is, “Consideration and approval / rejection of residents conducting business activities within the complex (action to be taken against guilty parties)”.

What action can they take against me? Is this legal?

Phil Calothi, owner and Managing Director of a leading Cape Town based managing agent company, Land and Sea Development Services (Pty) Ltd, advises:
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Auction kickbacks a 'sickness' in SA
Property law experts say auction kickbacks by banks, liquidators and executors have been going on for years and it's a sickness in South Africa. The Saturday Star revealed the 13-year-old paper trail with chief executive officer of Auction Alliance, Rael Levitt, having said in emails kickbacks would be paid in cash. 

According to the Saturday Star, Auction Alliance paid kickbacks to attorneys, liquidators and bank staff to ensure business went their way.

The paper revealed the 13-year-old paper trail with chief executive officer of Auction Alliance, Rael Levitt having said in emails kickbacks would be paid in cash. The kickbacks were typically 50 percent of the commission Auction Alliance earned and these rose up to 75 percent during market slumps to ensure business in bad times.
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Jawitz franchise network grows by 44%
Franchising has been a valuable expansion mechanism for Jawitz Properties and has achieved a 44 percent growth year-on-year.

The network of independently run real estate offices in geographically diverse locations has proved to be a successful strategy to grow the business.

To date the company has 38 franchises spread over the Eastern, Western and Southern Cape, the Free State, Gauteng, KwaZulu-Natal, Mauritius and Botswana.

Jawitz Properties intends aggressively marketing franchises in KwaZulu-Natal, Mpumalanga and Northern Province in 2013, says national franchise manager Pieter Davidtz.

Davidtz is not surprised at the increase in small independent real estate agencies switching to franchising.

“Franchising is a tested business model that provides immediate support with training, marketing, financial and business plans.
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Why buying is better than renting?
If you have money and want to own property, buy now instead of renting as this is cash wasted according to some property investors and experts.

Michael Bauer, general manager of IHFM, says property economists who insist on renting rather than buying see property losing value in real terms in the next 18 to 24 months.

He says these property economists forget three fundamental things:

-  Short-term price fluctuations generally do not matter in property because property investments are medium- to long-term and current prices are at an all-time low. 

The motto “buy low to sell high” is absolutely relevant now.

- Interest rates which are currently at an all-time low will not stay at these levels forever.

A buyer has the option to fix the interest rate for 12, 18, 24, 36 or 48 months at very low levels.

There is a real risk that a loan negotiated in 2013 might be at a 1 to 1.5 percent higher rate than one secured now.
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Business Rescue and property leases
South African commercial property owners not only have to deal with the Consumer Protection Act, the new Companies Act is another law to deal with.

According to Rael Levitt, chief executive officer of Auction Alliance, commercial property owners need to quickly brush up on Chapter 6 of the new Companies Act.

This is whereby a Business Rescue Practitioner can suspend a lease agreement.

The uptick in business rescue by commercial tenants makes it vital to know what happens to a commercial lease when the landlord goes into business rescue, he says.

He explains that unfortunately this adds strain to landlords and although business rescue is new and untested, South Africa may soon see tenants with heavy lease commitments going into business rescue in order to restructure their lease agreements.

The issue of insolvency and leases is not new to commercial owners and many landlords have lost tenants through companies going into liquidation.
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Take advantages in the property market
Despite the South African economic growth challenges, this year is set to present opportunities that property investors can take advantages of.

According to Marna van der Walt, chief executive officer of JHI Properties, the gradual recovery of the economy was slower in 2011 than anticipated yet it had a positive effect on disposable income, which reflected in positive retail growth.

Van der Walt explains that it is increasingly evident that the massive increases in electricity tariffs coupled with increases in fuel, rates and taxes are beginning to affect marginal tenants’ ability to meet monthly financial obligations, which in turn may lead to a rise in insolvencies, liquidations and unemployment.

She says in this period (2011) the Investment Property Databank reported that rising operating costs across all sectors can be attributed to a rise of around 50 percent with electricity hikes of 29 percent and rates and taxes 21 percent.

Since the introduction of the New Companies Act, a number of financially distressed companies are using business rescue to avoid liquidation.
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Investing - new units vs. second hand?
properties are still generally much cheaper than new ones, but new units remain a good option for many investors.

Tough economic times have tough consequences – and this is particularly evident with new residential developments, says Lanice Steward, managing director of Anne Porter Knight Frank.

“Cape developers have to be praised for the way in which, using every possible trick, they have kept their prices down.” 

However, buyers are now aware that, measured on an average square metre basis, it is now between 20 to 25% cheaper to buy a “second hand” home rather than a new one, says Steward.

Nevertheless, she says the flow of new developments to the market, although down some 60 to 70% on the highs of 2007, has by no means dried up – and for many buy-to-let investors and retirees, this is the only type of property they will consider.

Steward says she has on several occasions advised buyers to opt for a new project, especially if they are looking for a higher level of security, are not averse to reducing their living space and are disinclined to tackle the repaint or refurbishment work which are part and parcel of any home purchase if the house is over four or five years old.
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