AnalysisResidential News

Effective management of an estate is critical to its sustainability

Picture the scene – lush, green landscaped open areas and picture-perfect, neat homes offset against a backdrop of rolling green hills or majestic mountains. But behind the scenes, what is required to ensure the estate is effectively and successfully run in order to remain sustainable?

The effective collection of funds directly impacts the functioning of any estate and the legal obligation management has to ensure there are sufficient reserve funds for both unforeseen and anticipated eventualities, says Auren Freitas dos Santos, Legal & Compliance Officer for .

“Levy income is the lifeblood of any estate and as a result, ineffective management and collection of funds can have a crippling effect on its sustainability and success.

“The main objective of an estate is to carry on the promotion, advancement and protection of the owners’ interests in the estate and to maintain and control the common areas. Most estates have at least one or two high maintenance elements within their fence line such as golf courses, privately maintained roads, extensive gardens, swimming pools, leisure centres and the actual fence line itself, for that matter. Without a consistent and reliable inflow of funds an estate will not be able to fulfil its functions and will come to a crippling halt.”

Freitas dos Santos says the responsibility of managing the funds of an estate rests firmly in the hands of the executive committee, which is expected to take all reasonable steps to ensure the effective management and protection of the estate.

“As most executive committee members are laypersons with limited financial and legal knowledge, it is understandable why serving on such a committee is regarded as such a daunting task. For this reason, many estates struggle to find enough willing and capable nominees to serve on the executive committee, and it is even more reason why many executive committees elect to outsource this vital function to a professional and knowledgeable property management company.”

A person or company, other than an attorney, who for reward collects debts owed to another on the latter’s behalf, is regarded as a debt collector in terms of the Debt Collectors Act 114 of 1998, and therefore property management companies like Pam Golding Property Management Services, are required to be registered with the Council for Debt Collectors and to be in possession of a certificate of registration before they may act as such.

Freitas dos Santos says as registered debt collectors, property management companies are entitled to collect outstanding levies on behalf of estates and this collection process usually involves the following:
•Once a property management company has generated and issued levy statements to all owners within the estate, they need to actively manage the timeous payment of these. This active management must include telephonic and email follow-ups with owners who fail to settle their account before the required date of payment.
•Should an owner fail to settle their account before the required date of payment, which is usually the first day of each month, a friendly reminder must be issued. Given the busy lives that most people lead, one of the first things to be forgotten is the payment of levy accounts. For this reason, the use of debit orders is encouraged to minimise the amount of these oversights.
•Unfortunately, not all non-payments are a result of innocent oversights, but are rather a reflection of the tough economic times currently faced. When times are tough, some owners regard their levies as a soft target and as such they find it easier to justify skipping a month or two on levy payments than for instance skipping payments on their medical aid premiums or bond repayments. It is therefore important for estates to take a zero-tolerance approach toward the non-payment of levies to ensure that owners understand the importance of levies and the consequences of non-payment thereof.
•As soon as it becomes clear that a friendly reminder has failed to achieve the desired result, the property management company must immediately issue a letter of demand. Once the time limit set in the letter of demand for payment has lapsed, it is important that the outstanding amount is handed over to attorneys for the issuing of a summons. Although this may seem harsh, it is unfortunately the only way to avoid an unpaid levy account from spiralling out of control.

Adds Freitas dos Santos: “Once an outstanding levy account has been handed over to attorneys the legal collection process could take months, sometimes years, to yield results, given the heavy backlog of the country’s court system and there is a potential minefield of complications and legal defences which can prolong the process even further, while the estate and all its owners suffer as a result.

“Estates therefore need to ensure that all owners understand the importance of their levies and respect the need to pay them on time. This is why when it comes to the management and control of levies, prevention is always better than a cure and an effective and swift acting property management company can be a crucial strategic partner for any sustainable estate.”