Real Estate Investor Magazine South Africa December/ January 2018/2019 | Page 64

WEALTH PLANNING
Effective management of
an estate is critical to its
sustainability
BY JOSE’ DELGADO
P
icture 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 Pam Golding
Property Management Services.
“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:
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DECEMBER 2018/JANUARY 2019 SA Real Estate Investor Magazine
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.”
SOURCE: iProtect.co.za