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Wednesday Oct 16, 2013

Teamwork can save mismanaged sectional schemes

In some sectional title complexes the managing agents are left to run the scheme without much questioning or input from the trustees. This can lead to problems if that managing agent has not done all that he was meant to have done to keep it financially sound.

In a recent case where property management company IHFM was called in to assist with sorting out longstanding problems with finances and financial records, it was found that the previous managing agent had not kept proper records of account and there seemed to be mismanagement of the levies and the budgeting, said Michael Bauer, general manager of IHFM.

'This particular case was refreshing in the sense that all the trustees and owners in this 42 unit scheme, on calling in IHFM, had already worked out a comprehensive plan of action and needed our assistance to execute the plan. There was clear communication from the chairperson and trustees to the owners beforehand and the chairperson had garnered everyone's support to fix the problems with the management of the scheme.'
 
IHFM worked out a five year plan, which sorted out the problems with the levy collection (there had previously been under-budgeting each year which then led to a lack of funds to pay bills and do any maintenance on the building) and they realised that the scheme needed an 80% increase in the levies collected. It was also discovered that there was a large outstanding municipal bill and the building was in need of repainting.

It was decided that the best option was to use the services of Propell, the levy collection and finance company, to help fix the immediate problems with lack of funds as there was a R20 000 special levy needed from each owner to bail the scheme out.

With the three entities working together, said Bauer, they have in three years achieved all that the trustees set out to do. They have achieved financial stability (with a healthy reserve fund) and compliance by sorting out all the administrative problems and management. They have also managed to increase the values of their properties by refurbishing the building.

The refurbishment included a complete repainting and waterproofing of the building and upgrading the security of the scheme, which cost R1,2 million.

The handling of a complete refurbishment, said Bauer, is important. The employment of a professional surveyor is recommended. He will establish exactly what is needed, check the tenders carefully for misquoting or under-quoting and qualify the tenders by checking on the companies' track records.

This is a key aspect of any large project, said Bauer, because he will have the experience and full knowledge of the building industry and what is required whereas the trustees or managing agent might not.

The professional will also manage the project, the progress and payments, as well as the health and safety risks on site, said Bauer.

'A large refurbishment project handled well,' said Bauer, 'can increase the scheme's value by up to 10%. This is a prime example of how a sectional title scheme experiencing problems can sort all of these out by employing the right people for the various aspects and, then even increase their properties' value over a period of time.'

IHFM Press Release

    
 

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