About Me

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I am a qualified Attorney. I specialise in Property Law, Commercial Law, Corporate Law and Trusts.
 
Please visit our website at www.prop-law.co.za for more details.
 
I am an elected Committee Member of the Property Committee of the Association of Pretoria Attorneys and through my involvement, I like to ensure that I am constantly at the "sharp-end" of Conveyancing Practice.

I am the elected Chairman on the Gauteng Council of SAPOA. The South African Property Owners Association (SAPOA) is the biggest and most influential institution in the property industry. SAPOA members control about 90% of commercial property in SA, with a combined portfolio in excess of R150 Billion (about $22 Billion). I am also on the National Council and the National Legal Committee of SAPOA.
 
Member of the Institute of Directors South Africa and Member of the Sirdar Governance Panel.

12 December 2011

Sharemax: Liquidation averted?

Sharemax: Liquidation averted?

Not quite, say critics, who think the rescue scheme may not get past a court.

Sharemax investors have reportedly voted overwhelming in favour of a rescue scheme. The scheme aims to prevent the liquidation of syndication companies sold under the Sharemax banner.

All that remains is for a court to sanction the scheme. But some believe this won’t happen.

Approximately 35 000 investors, many of them elderly, have placed about R4.5bn in the various Sharemax schemes. Virtually all of these investors were acting on advice received from brokers who received generous commission from the sales.

One of the most outspoken critics of the rescue scheme’s process is Niki Vontas, CEO of listed property stock Bonatla. Bonatla once proposed its own rescue scheme for Sharemax, but subsequently walked away from the deal.

Vontas describes the Sharemax scheme as a “joke”. He says: “A competent judge will not validate such a ridiculous scheme.”

Vontas is no stranger to rescue schemes. His company successfully saved troubled Bluezone syndications from liquidation. The Bluezone syndications had already been provisionally liquidated, which makes the rescue all the more remarkable. Companies placed under provisional liquidation are almost always liquidated permanently.

It remains to be seen how successful Vontas’s Bluezone rescue will be, but most experts agree that there are few fates more damaging to property syndication investors than liquidation.

The Sharemax rescue plan has been led by corporate lawyer Connie Myburgh, who readers may remember for his aggressive defence of Garek, a scheme that cost its investors untold millions.

The scheme is not cheap; documents (click here to download) estimate the total cost at R11m, the bulk of which comprises legal fees. These fees are paid regardless of whether the scheme is successful. The fees are paid from those syndication schemes that have cash available, incurring further debt for those that don’t.

Vontas says that for the scheme to be properly put together, each company in the Sharemax stable should have voted separately. This was not the case; votes were pooled. Vontas also claims that shareholders were not given proper notice.

Chris de Beer, an attorney representing Sharemax investors, agrees that the process is flawed. He says that the rescue plan, if approved, will serve to legalise Sharemax’s illegal structure. His clients have instructed an advocate to attend court in a bid to prevent the scheme’s sanction.

De Beer has previously applied to the North Gauteng High Court for the judicial management of a handful of Sharemax syndication schemes. The matter is due to be heard on May 7 2012. However, De Beer concedes that if the Sharemax rescue scheme is sanctioned by the court, it would mean that his judicial management application is less likely to be successful.

De Beer says that it has never been his intention to liquidate the Sharemax syndication companies. “We just want to make sure a proper process is followed.”

...

09 December 2011

Joburg’s town planning blunder

Joburg’s town planning blunder

“Disastrous” scheme to be delayed for years as it goes through appeal process.

The implementation of Johannesburg’s new consolidated town planning scheme is likely to be delayed for up to a further two years as industry professionals take it on appeal to the townships board.

The move to appeal, which will see as many as five separate industry bodies filing to have the scheme reworked, comes on widespread dissatisfaction with the quality and practicality of the key document.

Industry bodies have accused Johannesburg of failing to properly consider submissions made during the consultation processes prior to the drafting of the document, resulting in inconsistent and contradictory definitions.

Currently, Johannesburg has 14 separate town planning schemes which cover historic town council jurisdictions around Johannesburg, such as Sandton, Roodepoort and the CBD.

In drafting the new legislation, Johannesburg has attempted to consolidate the rules and regulations of the 14 existing schemes into a single document.

The inconsistencies in the new document are likely to impede property development in the city. This is because ambiguous or contradictory definitions will create confusion during the planning phase of developments. It is also understood that the definitions for alterations and rezoning may create further confusion as every aspect of the building will be regulated. Valuations would also be affected.

As a result the published scheme, promulgated in late November, has been labelled by industry professionals as a “disastrous”, “unworkable” and “legally incompetent” document.

The South African Association of Consulting Professional Planners (SAACPP) on Thursday confirmed that it will be filing an appeal to prevent the scheme from entering into effect as law.

“The industry is very much in favour of a consolidated scheme but the way it’s been drafted is simply unworkable,” said SAACPP Johannesburg Chairperson, Lloyd Druce.

“It wasn’t just a consolidated scheme; there where all sorts of clauses added. There where changes in definitions; there where all sorts of issues … They [Johannesburg] nevertheless went and published the scheme without considering what had been submitted as objections,” he said.

“If left to proceed into law … instead of creating a new, simple, understandable and coherent document to manage land use in the city, it will create a document embroiled in confusion,” said Druce.

The scheme was expected to become law 56 days following its promulgation on November 23. According Druce, four other bodies are believed to be preparing appeals which must be filed by December 21. The appeal process is likely to delay implementation for at least two years, he said.

The planning scheme is seen as a fundamental, legally binding, document designed to guide all future property development in the city while defining the zoning and guising alterations of existing properties.

Adv Douglas Shaw examined the document for the South African Property Owners Association (Sapoa). The organisation said that the scheme in its current form “will have significant negative effects on the property industry”.

According to Shaw, the importance of the document should not be underestimated: “It is a very important document. Any development at all in the city will use the document as a guide.

“It’s that fundamental; no development can take place without looking at the document…

“The reason why you go to consultation for comment is that when you put any document to other people, they see the flaws in the document and they give you good ideas … If people point out things which are glaringly inconsistent, or they contradict themselves and you don’t correct them, it defeats the whole point of the exercise,” said Shaw.

“If it’s a point of consistency or logic then not to change just means that you have not really applied your mind to it, you have been lazy.”

“It’s become an unholy mess at the moment,” said Keith Brebnor, CEO of the Johannesburg Chamber of Commerce and Industry (JCCI). He added that key submissions made by industry stakeholders “have been ignored”.

Johannesburg had not replied to a request for comment by the time of going to print.

...

World`s priciest streets (with SA comparison)

World`s priciest streets (with SA comparison)

The most expensive address in the world is not in London, Paris, or New York.

“The most expensive address in the world is not in London, Paris, or New York, as might be expected, but in Hong Kong,” says luxury home marketer Ronald Ennik, CEO of Ennik Estates (an affiliate of Christie’s International Real Estate).

“Homes on Severn Road in Hong Kong come with the highest price tag of US$78 200 (about R625 000) per square metre on a recent Wall Street Journal list of the 10 most expensive streets on the planet.

“Named after Claude Severn, Governor of Hong Kong when it was a British colony, Severn Road was followed in second place by Britain’s most expensive street – London’s prestige Kensington Palace Gardens (a private road), which is priced at R605 000 per sqm,” says Ennik.

“New York’s Fifth Avenue (R495 000 per sqm) came in at number five on the list, followed by Quai Anatole in Paris (R352 000 per sqm).”

The rest of the Journal’s Top 10 streets are:

Avenue Princess Grace (3) in Monaco, at R550 000/sqm; Chemin de Saint-Hospice (4) on the French Riviera’s Cap Ferrat peninsula (R495 000/sqm); Rue Bellot (7) in Geneva (R341 000/sqm); Via Romazzino (8) in Porto Cervo, Sardinia (R187 000/sqm); Wolseley Road (9) in Sydney Australia (R165 000 per sqm); and Ostozhenka (10) in Moscow (R143 000 per sqm).

“The fact that Severn Road topped the Journal’s list for the second year running speaks volumes for the strength and resilience not only of the economy and property market of the city of Hong Kong but also the greater Asia Pacific region,” says Ennik.

“So much so that it came as no surprise when, in June this year, Christie’s International Real Estate established its Asian Regional headquarters in Hong Kong.

“The Asia Pacific region has a passion for real estate that is unparalleled globally,” Neil Palmer CEO of the company, said at the time.

It was not long after a home was sold in the city, on 10 Pollocks Path, for US$12 327 (just under R100 000) per square foot!

“From our knowledge of luxury sales worldwide, we believe that this sale achieved the highest price ever per square foot,” said Palmer.”

To put this in perspective,” says Ennik, “prices of top end properties on South Africa’s priciest streets – such as Nettleton Road in Cape Town’s Clifton (listed by Wikipedia as Africa’s most expensive street), and Coronation Road in Sandhurst, Sandton (Johannesburg) – are about R100 000 per sqm!”

“Hopefully, given the weaker Rand and the uncertainty still surrounding the eurozone debt crisis, foreign investors may soon start looking deeper at what the luxury homes market in South Africa has to offer right now,” says Ennik.

“Perhaps visiting delegates to the COP17 indaba in Durban will do just that before they return home,” he concludes.

* This report was prepared by Ennik Estates

How to fix Africa - China perspectives

How to fix Africa - China perspectives

Revealing insights from a key Chinese leader.

African countries are getting the cheap goods they deserve and are forcing Chinese companies to keep prices so low that other operators can't compete on the continent. What's more, businesses in Africa pay their workers too much money, who also don't work as hard as the Chinese.

If poor quality goods get through border posts, we should blame our own officials for failing to enforce controls - not Chinese manufacturers. And, while we are pondering China's successes in Africa, we may as well come to terms with the fact that China is indeed hugely interested in cushy resources deals and extra money-making opportunities for itself and its citizens.

Of course, it sounds very unPC to set out the facts in this way. This is in an era in which China wants to be seen as the developing world's benevolent big brother, and its growing band of supporters across Africa shudder at the mere mention that the world's emerging superpower may be little more than a self-interested neo-colonialist.

But that's pretty much the way one of China's most influential political figure in Africa, Lu Shaye, Director-General of the Department of African Affairs explained the Chinese viewpoint in a recent interview with Jeune Africa.

China's propaganda commissars were so pleased with the outcome of his chat with Jean-Louis Gouraud that they had the full text translated and posted this week on the Chinese government-sponsored Forum for China Africa Cooperation website, for all China's followers across Africa to digest.

Usually the Focac website makes for bland reading. It carries blatantly biased articles aiming to paint China as a benign operator in Africa and endless pieces involving African political leaders shamelessly flattering the world's new emperors in the east.

China censors the news and has a highly effective system to monitor its citizens' reading habits and activities in cyberspace. The Jeune Africa article seems to have slipped through the state censorship net.

It makes for fascinating reading for anyone with a hint of concern about the traction China's state machinery is gaining in Africa. Lu's comments provide rare insights into what Chinese leaders really think about Africa.

It will be interesting to see how long the piece it remains posted; if past controversial articles about China's motives in the world are anything to go by, it won't be available for long. After all, China is working hard at enhancing its image in Africa as part of its overall move to build its soft power in the developing world.

So, while it is up, let's have a look at what Lu thinks about China's friends in Africa.

Although Lu is at pains to state that China doesn't expect African countries to follow it as a model in any way, he gives a glimpse of what the Chinese think African countries are doing wrong or need to fix. Here are some pearls, starting with his ideas on how African companies and enterprises can improve their lot:

Competitive labour costs: Treat ‘em mean

Citing the example of government assistance projects in Africa, Lu says Chinese companies are competitive because they scrimp on labour costs, spending 95% on the project compared to western companies' 80% on "on their own staff".

"It is true that the Chinese workers work in harsh working conditions. The Chinese employees work in tougher conditions than the employees of western companies. The Chinese have a spirit of enduring hardship," says the Chinese leader candidly.

"They live a hard life, eat simple food and live in simple domiciles so that they can send home the money they earned to raise their families and improve their living conditions. The Chinese workers can endure hardship.

"They work in three shifts a day and work all day and all night to speed up project schedules. That is why the Chinese companies are competitive. They spend less on the workers," he says.

China's under-cutting strategy benefits local government

Low labour costs are among the reasons Chinese companies can out-bid local companies in the African market, says Lu. The others are low materials and equipment costs and high labour productivity.

"With the respect to the claim that the Chinese companies take a low-cost strategy in the contract market of Africa, the advantage of Chinese companies is actually low cost...This is good for the local government, because the local government can spend less in constructing a project."

Lu says this strategy does have a "big impact on local companies of the same trade" and that "Chinese companies have no other purpose than making more money".

He notes that "the free economy is about free competition" and says that African companies "need to increase their competitive power".

Low pay for Africans: a better deal than in China

Responding to criticism that Chinese companies exploit local labour in African countries, Lu points out that Chinese wages and salaries aren't just low compared to norms in Africa - they're low back home, too.

Look at this issue objectively, he implores China critics. Comparing the ¥4 000 (roughly the same equivalent in South African rands or about US$700 to $800) being demanded by Zambian workers of their Chinese employees, he notes that pay is much lower in China.

"The minimum wage of Shanghai, the most developed city in China, is ¥1 100. The average wage of construction workers in Shanghai, Guangzhou, and other developed cities in the east of China is just over ¥2 000.

"The wage of manufacturing workers is between ¥2 000 to ¥3 000. What does ¥4 000 a month mean? It is the wage of an ordinary white-collar (worker) in China," explains Lu.

Labour laws in Africa are too strict

Although Lu says it is basically not China's business to comment on government policy, he reckons countries in Africa shouldn't raise wages and salaries "beyond reality" or they will "scare off investors" to the detriment of economic development.

"In some African countries, the labour laws are very strict. The governments even copy the laws of western countries. With such labour laws, companies are afraid of recruiting staff, including the western companies. They will not easily recruit employees because they cannot fire employees," he says.

Good deals for Africa's resources

A major criticism about China's intentions in Africa is that it is largely interested in getting its hands on natural resources at attractive prices. Lu says that in this regard China is no different from the West.

He says: "China's investment in Africa is mainly concentrated on resource-rich countries. Maybe you are right. Aren't the western countries the same? We should be realistic.

"Resource-rich countries do have more business cooperation opportunities and investment opportunities. Capital is always profit-driven. Where there is no profit or no return on investment, I don't think the west will go.

"In the African countries that China has invested in, there are always a lot of western companies, far more than Chinese companies. China's investment only accounted for a small part of foreign capitals in these countries. Most of foreign capitals still come from the west," says Lu.

Thanks, Mr Lu, for finally setting us straight on some contentious issues. At least we can't accuse Mr Lu of speaking to his friends in Africa about our problems with a dagger between his teeth - or saying one thing and meaning another - as the Chinese proverb goes.

Is it time for African countries to rethink their labour laws so that African businesses can become more internationally competitive? Are Chinese companies doing governments a financial favour by undercutting local operations? Share your views below this article.

08 December 2011

The Investment Case – Redefine Properties Ltd. - 101: For beginners

The Investment Case – Redefine Properties Ltd.


A liquid property option.

Listed property has become an increasingly popular investment in recent times. It has been one of the top performing asset classes of the past decade, offering good income returns as the sector's defensive qualities have stood up through the economic upheaval since 2008.

Offering lower risk than equities and generally higher returns than bonds, listed property has become particularly attractive to more conservative investors looking for a growing income stream. As property funds pay out almost all of their income, they also serve as protection against inflation, since rental incomes generally increase in line with or slightly above inflation.

While some analysts believe this performance from listed property funds is unlikely to continue, this sector continues to attract investor interest. As the second biggest local property fund on the JSE, Redefine has been one of the beneficiaries.

Redefine's portfolio comprises nearly 400 properties across the office, retail and industrial sectors. In addition, it owns 29.4% of listed retail property fund Hyprop and a controlling stake in London-listed business Redefine International plc (which it holds through JSE-listed Redefine International Ltd.).

History

The Redefine Income Fund was launched in 1999 and listed on the JSE the following year. Its initial portfolio consisted of 50% direct property interests, and 50% listed securities.

The company made its first offshore play in 2006 by acquiring an 18% interest in London-listed Ciref plc. This move made it the first JSE-listed property fund to take on overseas assets.

In 1999, Redefine acquired all the units of listed property fund ApexHi (which had absorbed Ambit earlier the same year) and its management company Madison Property Fund Managers. This led to a merger between the three entities.

During 2010, Redefine increased its interest in Ciref plc to a majority holding and effected the name change to Redefine Properties International. As it was unable to gain approval from the South African Reserve Bank for an inward listing for this subsidiary, Redefine elected to transfer this entire shareholding into a new local listing called Redefine International Ltd.

Earlier this year, Redefine International plc completed a reverse takeover of property investment company Wichford, which gave it a listing on the main board of the London Stock Exchange.

Dividends

For the financial year ended 31 August 2011 Redefine paid out 68 cents per linked unit. This followed distributions of 66.5 cents per linked unit in 2010, 56.55 cents per linked unit in 2009 and 56.63 cents per linked unit in 2008.

The counter offers a yield of 8.5%.

Which funds hold this stock?

Redefine is the second largest holding in all three of South Africa's top performing listed property unit trusts over the past three to five years. It makes up 18.5% of the Prudential Enhanced SA Property Tracker Fund, 17.0% of the Stanlib Property Income Fund and 15.7% of the Investec Property Equity Fund.

Only one of the five leading general equity funds holds Redefine stock. The Prudential Equity Fund gives the counter a weighting of 0.3%.

To see which funds are buying and selling the counter, visit Moneyweb's Unit Trust Portfolio Tool.

Why would an individual consider investing in this company?

Due to its size, Redefine offers investors a degree of liquidity in a sector that is often illiquid. It therefore offers a good entry point into the property sector.

Redefine is also able to spread its fixed costs across a wider portfolio of properties than most of its peers, which should increase its yields. This has been further enhanced by the company bringing its property management functions in-house rather than outsourcing them.

“Redefine's size allows scale in negotiating borrowing rates from lenders,” notes Efficent Select analyst Stuart Sinclair. “With a forward yield of close to 9%, the counter is trading at a significant discount to the sector despite its size and liquidity.”

Through Redefine International, the stock also offers investors exposure to properties in the UK, Germany, Australia and Switzerland. While its foreign operations only accounted for marginally over 5% of Redefine's net property income in the last financial year, this has the potential to grow significantly. Redefine International owns 184 properties with a value exceeding £1bn, and the group has indicated that it has intentions to focus more on international expansion.

What risks does this company face?

Redefine's direct property portfolio has the highest exposure to the office sector of any of its peers. As a result, the fund is most susceptible to downturns in this market.

“The office sector is facing oversupply in many nodes and continues to lag the retail and industrial sectors,” says Sinclair. “The high exposure to the office sector in particular has led to an overall vacancy rate of close to 9%.”

Like all property companies, Redefine is also facing pressure from tenants to keep rental increases to a minimum. This is primarily due to the impact of the higher costs of water and electricity.

Furthermore, Sinclair believes that Redefine's large portfolio can present challenges to management. With close to 400 properties to look after, the fund could struggle to keep a handle on all of its assets. The group is however taking steps to reduce this number.

Investor trust in Redefine was also dented by the company's failure to meet its own forecast for distributions in the 2009 financial year. The fund will be acutely aware that it cannot afford to damage this confidence any further by missing future targets.

Where does this company’s growth potential lie?

In the short-term, Redefine's growth prospects remain modest, as economic conditions remain mostly unchanged.

“In the past, the group has been reliant on development and non-recurring revenue streams to boost growth,” Sinclair notes. “But given the current environment, many of these streams have dried up.”

The group is however in a process of disposing of a number of its lower grade properties, valued at about 10% of its portfolio. It hopes to replace these with fewer properties of higher quality.

In this regard, it is in talks to acquire between seven and fourteen properties owned by Zenprop Property Holdings. It has also announced that it will be unbundling Arrowhead Properties and its 98 properties into a separate listing. This will simplify the Redefine portfolio and make it easier to manage.

In Namibia, Redefine is looking to achieve control of Oryx Properties through increasing its stake in that business. Oryx has a portfolio of 26 properties, including Windhoek's premier retail site, Mearua Mall.

It is also possible that Redefine may at some point make a bid to acquire all of Hyprop, which is primarily focused on retail properties. A number of analysts believe that this would make it a more balanced portfolio and make it comparable to the JSE's largest listed property fund, Growthpoint.

For more, visit Moneyweb's click-a-company profile on Redefine Properties Ltd.


07 December 2011

Rebosis to acquire several properties

Rebosis to acquire several properties

In line with its strategy of acquiring large quality properties.

Johannesburg, Dec 7 (I-Net Bridge) - Rebosis Property Fund (REB) the first black-managed and substantially black-held property fund to have listed on the JSE, announced on Wednesday that it had concluded agreements for the acquisition of letting enterprises and properties from several vendors.

These vendors were listed as being Square Peg Properties (Proprietary) Limited and Rymer Trading CC (the Capital Towers acquisition"); Ziningi Properties (Proprietary) Limited (the "Revenue Building acquisition"); Swish Property Four (Proprietary) Limited (the "First Avenue acquisition"); Dream World Investments 374 (Proprietary) Limited (the "Harrison Street acquisition"); and Trifecta Prop 11 (Proprietary) Limited (the "SASSA Campus acquisition"); (each "a transaction" or "an acquisition" and together the "transactions").

The fund said that the acquisitions were consistent with Rebosis' strategy of acquiring large quality properties with a strong sovereign or blue chip underpin. The property portfolio was dominated by national government, with an element of blue chip corporate, with Standard Bank as a major tenant in one of the buildings.

It said that these strategic acquisitions would improve the geographic spread of the company's government tenanted properties resulting in less concentration in, and exposure to, Pretoria.

The total purchase consideration payable by Rebosis for the property portfolio is R734 million. Payment of the purchase consideration for each of the acquisitions will be secured by separate finance guarantees for 50% of the purchase consideration payable per acquisition. The balance of the purchase consideration will be settled through a vendor consideration placement.

05 December 2011

Joburg`s new town planning scheme spells disaster

Joburg`s new town planning scheme spells disaster

SAPOA says the city needs to go back to the drawing board.

Johannesburg, Dec 5 (I-Net Bridge) - The City of Johannesburg's new town planning scheme is unworkable according to the South African Property Owners Association (SAPOA).

The City of Jo'burg implemented a new town planning scheme last week - The Consolidated Johannesburg Town Planning Scheme 2011 - intended to combine over a dozen different planning schemes or zoning regulations in the municipal area of Johannesburg into one set of uniform zoning provisions, without altering existing zoning or development rights attached to any particular property.

However, SAPOA argued that instead of streamlining town planning in this growing city, the errors and inadequacies of the scheme were so severe that the city needed to go back to the drawing board.

SAPOA also pointed to a number of alarming bombshells buried in its fine print.An effective appropriation of rights without compensation arose from a clause that provided for approved rights which were not exercised within 24 months to become "null and void".

The scheme also stated that the municipality was not bound by its own town planning scheme.

Neil Gopal, CEO of SAPOA said, "We acknowledge that there is a need for a town planning scheme that ensures the regulation of land is uniform and more efficient throughout the municipal area, but this is not what this document does".

According to SAPOA's professional and legal advice, the 2011 Jo'burg Town Planning scheme contradicted itself in numerous places, referred to schedules and annexures not in the document, contained an abundance of inadequate and confusing definitions, and even contradicted other legislation, such as its definition of an "erf" which doesn't conform with the Land Survey Act.

"In general the new scheme is poorly compiled. The meaning and interpretation of many provisions is impossible to understand - either logically or legally," according to Gopal, who elaborated that this was the conclusion reached by a large number of professionals and practitioners in the field of town planning.

"In fact, three full sections were missing from the copy supplied to SAPOA and despite repeated efforts requesting this information, we have yet to receive it".

"The lack of interaction in terms of acknowledgement of letters, submissions made, requests for information, and so forth, from the City of Johannesburg is a worrying trend".
He noted that this was only one in a long chain of events where the city had switched off to the needs of its commercial property owners and homeowners, who were the largest rates payers.

He said: "We, and other professionals, intend to lodge an appeal to the Townships Board".

R4.6bn Pickvest rescue hinges on property billionaire

R4.6bn Pickvest rescue hinges on property billionaire

Rescue practitioner says the choice is simple: Accept Georgiou’s deal, or liquidate.

Pickvest investors stand to lose an estimated R3.8bn, or 81% of their capital, unless they accept a rescue offer proposed by controversial billionaire Nic Georgiou. This is the message from business rescue practitioner Hans Klopper who filed his plan to save the Pickvest property syndications on Wednesday. The rescue plan can be downloaded here. It was Georgiou who, through his companies, “guaranteed” the generous returns offered by Pickvest syndications. But these guarantees turned out to be worthless when problems started to emerge at the syndication giant earlier this year. Klopper was appointed to the eight Pickvest schemes in a bid to prevent their liquidation. His appointment provides the syndications with temporary protection from their creditors. This protection gives Klopper time to decide if the syndications can be saved.

In the 62-page rescue document, Klopper effectively tells investors they can choose Georgiou’s offer, or face the liquidation of their investments. Says Klopper: “It is evident that the prospects of the investors recovering their capital without the [Georgiou] offer being accepted are bleak whereas the recovery prospects, should the offer be accepted, are considerably improved.”
Klopper adds that the Georgiou proposal, known as the Orthotouch offer, is the “only realistic opportunity” for investors to recover their capital.

The Orthotouch offer is nothing new. It was proposed to investors in April. The deal would see Orthotouch, a company controlled by Georgiou, buying all of investors’ buildings, and paying for them after five years. They will also earn an income, starting at 6% in year one, increasing to 7% by year five.

However, Klopper has renegotiated the original transaction with clauses and safeguards that he says are to the benefit of Pickvest investors. He says the deal will be underpinned by property worth more than R4bn, and that investors can appoint two directors to the Orthotouch board. Further, Georgiou’s company, Zephan, will transfer buildings worth approximately R1.5bn into Orthotouch for added security. Orthotouch may not lend any money to or invest in third parties while investors remain unpaid.

Klopper says there has been a “groundswell of optimism” from financial advisers, some of whom were steadfastly opposed to the Orthotouch offer in its original form.

Investors are scheduled to meet on December 14, where they can propose amendments to Klopper’s plan and vote to approve it. The plan amounts to the acceptance of the renegotiated Orthotouch offer.
A key feature of the Orthotouch deal is that it is dependent on its acceptance by investors in all eight property syndications. Those in the Highveld 19-22 might feel they have nothing to lose by voting for Georgiou’s proposal. But those invested in the healthiest syndication, Highveld 18, may be less inclined to invest another five years with Georgiou.

Bleak liquidation scenario

Klopper provides investors with estimates of what they can expect to receive in the event of liquidation. It is no surprise that those invested in the older syndications, Highveld 15-18, are expected to fare considerably better than the others. This is because the older syndications actually own property. The others do not.
In April Moneyweb reported that Highveld 18 is the healthiest of these four syndications, and that 16 was in the most trouble. Klopper arrives at the same conclusion in his business rescue plan.

According to Klopper’s estimates, an investor in Highveld 18 might hope to recover 61% of their capital. An investor in Highveld 16 might get 35c. Klopper’s estimates are based on the orderly sale of assets at market value. He estimates that the return could even be 50 percent lower if the assets are sold at auction prices.

For the investors in the newer syndications, Highveld 19-22, the situation is considerably bleaker. These syndications do not own any property. Their only asset is a claim against a company called Bosman & Visser, which has no assets to speak of. For more on this perilous situation, see this article.

Klopper describes the difficulties of pursuing the claim against Bosman & Visser (B&V) in his rescue plan. He says that at least R10m will be needed to sue B&V. In turn, the liquidators of B&V would need money to sue Georgiou’s company Zephan, which has so far failed to deliver investors’ buildings.

Klopper says that Zephan “will undoubtedly defend such action and institute a counterclaim for damages against B&V.”

If the syndications Highveld 19-22 are liquidated, Klopper expects investors to recover no more than R250m out of a total of R3.5bn invested. He also warns that this recovery could take years. Investors in Highveld 21, the largest, are the worst off, with an expected recovery of only 2% of their capital. The best is Highveld 22 with an expected recovery of 17.6%.

 A summary follows:

Syndication name
Expected distribution to investors (Rm)
Cents in the Rand
Highveld 15
98.96
37.08
Highveld 16
145.37
35.39
Highveld 17
149.58
60.01
Highveld 18
218.51
60.89
Highveld 19
24.22
4.01
Highveld 20
22.10
3.40
Highveld 21
26.00
1.97
Highveld 22
156.40
17.61
841.15











Global housing markets struggling

Global housing markets struggling

* Please see my page in Global Property Guide. www.globalpropertyguide.com/Africa/South-Africa/Lawyers

** This article was prepared by Global Property Guide: http://www.globalpropertyguide.com/


House prices fell in 25 countries, South Africa included. See comparison table on the
Global Property Guide Website.

The world’s housing markets had a weak third quarter of 2011, according to the latest survey of world-wide house price indices prepared by the Global Property Guide. During the year to end Q3 2011, house prices fell in 25 countries, of the 44 countries for which quarterly house price statistics are available, and rose in only 19 countries.

Moreover, 26 housing markets performed more poorly during the year to the third quarter than last year, while only 18 countries performed better.

The Global Property Guide’s statistical presentation uses price-changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents.

What is most remarkable this quarter is the wide variety of outcomes:

The BRICs’ two spectacular outperformers

India and Brazil’s housing markets have continued their spectacular outperformance, with Delhi house prices up 22.68% during the year to Q3 2011, according to National Housing Bank (NHB) figures. There were strong house price increases in almost all India’s major cities, reflecting the country’s current high rate of consumer price inflation, despite a drop in demand resulting from the repo rate hike in October (currently at 8.50%), the 13th since March 2010, making home loans costlier.

The NHB Residex only started publishing quarterly figures in 2010; from 2008 to 2009, the Residex was updated semi-annually.

Brazil’s Sao Paolo had the second highest house price rise in the world during the third quarter, with house prices up 5.88% during the quarter, according to the FIPE- Zap price index. Sao Paolo had an astonishing year, with house prices up 20.26% during the year to Q3 2011. The country is experiencing an unprecedented boom, not least because it is the host country for the World Cup in 2014 and the Olympics in Rio de Janeiro in 2016.

Europe’s housing markets mixed

The world’s second strongest quarter-on-quarter house price rise occurred in an unexpected city - Vienna, where house prices surged by 5.44% during the quarter (and +4.25% on the year), continuing 6 years of nearly unbroken price rises for Austria’s capital.

The Baltics have also performed strongly. Latvia is the third best performer among all reporting countries in our survey over the twelve months to Q3 2011. In Riga, standard type apartments rose 13.31% year-on-year, a quick comeback after a fall of 5.40% in the second quarter.

Following Latvia was Estonia, whose housing market is rallying after three years of terrific losses that began during the onset of the global financial crisis. During the year to end Q3 2011, house prices in Tallinn were up 12.30% with a quarterly rise of 2.71%.

And though prices in Lithuania’s five largest cities were down on the year to Q3 (-4.44%), their momentum is up compared to last year. During the latest quarter Lithuania’s house prices rose very slightly (+0.22%). Generally Lithuania follows the pattern of Latvia and Estonia, with a lag, so the latest quarter’s house price rises may be a precursor to a house price recovery in the new year.

Other European markets which have enjoyed satisfactory increases were Norway (+6.74%), France (+4.80%), and Switzerland (+3.35 %).

Modest house price increases were seen in Slovenia (+0.82%), Iceland (+0.76%), Germany (+0.66%) and Luxembourg (+0.55%) in the year to Q3 2011.

The Irish housing market remains the world’s weakest performer. House prices were down 15.61% year-on-year, the steepest decline since 2008. Quarter-on-quarter, Ireland’s house prices slid 4.25%.
Several other European housing markets experienced accelerated downturns during the year ending in the third quarter of 2011, includingNetherlands (-5.20%), Portugal (-6.77%), Slovak Republic (-7.94%), Warsaw, Poland (-7.95%), Spain (-8.41%) and Bulgaria (-9.65%).

Conversely, European countries which saw slower house price falls this year than the previous year include Turkey (-0.50%), Russia (-3.47%),Croatia (-4.59%), Hungary (-4.67%), Athens, Greece (-6.57%) and Kiev, Ukraine (-7.02%).

Asian housing markets now cooling

In Asia, several countries had house price increases during the year to end Q3 2011, albeit less strong than last year, following the government measures to curb the heat in their respective housing markets.
In Hong Kong, house prices were up 12.07% year-on-year, after a rise of 19.30% the previous year.
In Malaysia, house prices rose by 3.15% year-on-year, after a rise of 5.76% during the same period last year.

In Singapore, house prices rose by 2.73% year-on-year, a big drop from last year’s 18.96%.

In Taiwan, house prices were up a mere 0.46% year-on-year, after a rise of 6.97% during the same period the previous year. During the latest quarter, house prices were down 7.02%.

However, housing markets in South Korea and Philippines (Makati CBD) improved from a year earlier with price rises of 1.55% and 0.89%, respectively.

In Japan (Tokyo) and China (Shanghai), housing markets have been deteriorating since Q1 2011, and during the year to end Q3 2011, house prices dropped by 1.99% and 4.16%, respectively. House price declines are being reported across China, indicating the success of government measures during the past year. The country's skyrocketing housing prices have been blamed for social tensions and other economic problems.

Patchy progress for North America

The Canadian housing market has been a notable performer in the year to Q3 2011, with house prices in the six cities rising by 3.25% year-on-year, according to Teranet – National Bank Composite House Price Index. Record-low interest rates and a fairly stable Canadian economy have bolstered consumer confidence in the housing market. During the third quarter, house prices were up 3.46%.

In the United States, the housing market drifted lower as house prices plummeted by 7.22% (seasonally-adjusted) year-on-year to Q3 2011, according to the Federal Housing Finance Agency (FHFA). However, the number of homeowners who owe more than their homes’ worth decreased modestly in the third quarter, though levels remained high.

The seasonally-adjusted Case-Shiller index was a bit more negative, as it fell by 7.42% from a year earlier, and by 1.61% in the latest quarter.
"I don't know what will happen, but I don't see any reason to predict the recovery now," said index co-founder Robert Shiller to Reuters on November 29.

Israeli house price boom now over

House prices in Israel fell 0.58% in the year to Q3 2011, the first drop since 2009. During the latest quarter, house prices were down 3.65%.

The moderation in home prices comes against the background of the continued increase in the number of building starts, the lagged effect of the increase in the interest rate, measures introduced by the Bank of Israel affecting mortgages, and steps taken by the Ministry of Finance in real estate taxation. The effect of these moves is expected to continue and be evident going forward.

Pacific housing markets heading down

In New Zealand, median house prices were down 4.30% from a year earlier, with a quarterly house price fall of 2.26%. However, there is optimism in the housing market buoyed by low interest rates and recovery following earthquakes in Christchurch.

High interest rates and global economic uncertainty have continued to impact the Australian housing market, and it slumped 5.55% in the year to Q3 2011, the third quarter in which annual house price falls were reported this year.

Accordingly, the Reserve Bank of Australia (RBA) lowered the benchmark interest rate in November, the first time since April 2009, moving to boost the nation's economy amid uncertainty stemming from Europe's debt crisis. The benchmark rate is currently at 4.50%.

** This article was prepared by Global Property Guide: www.globalpropertyguide.com

01 December 2011

House prices on the downturn again: FNB

House prices on the downturn again: FNB

After a brief uptick around mid-year.

Johannesburg, Dec 1 (I-Net Bridge) - House price growth is on the downturn once again, after a brief uptick around mid-year according to FNB's House Price Index.

The November average house price was still 3.2% higher than November a year ago (year-on-year), but this represents a slower growth rate than the October revised year-on-year growth rate of 4%, and represents the third consecutive month of slowing year-on-year house price growth.

The average price of homes traded, according to the FNB House Price Index, was R804,242.

In real terms (prices adjusted for general consumer price inflation) the October FNB House Price Index declined by -1.9% year-on-year (November consumer price data not yet available), with consumer price inflation of 6% in that month significantly higher than the 4% nominal year-on-year growth in house prices.

FNB said that the latest data point now meant that, in nominal terms, the average house price in real terms was -16.6% lower than its long term peak reached in February 2008, a significant correction to date.

In nominal terms, the index was a marginal +5% higher than it was in February 2008.

However, compared to July 2000 when the index started, the average price at November 2011 was 209.5% higher in nominal terms, and 63.8% higher in real terms.
On a month-on-month basis, the seasonally-adjusted FNB House Price Index showed the residential market to already have been in a state of nominal price decline (negative growth) for the past 4 months.

In November, the extent of this price decline on October was -0.74%, which was slightly less decline than the revised -0.89% measured in October. Since the seasonally-adjusted price decline started four months ago, the total decline had been -2.3%.

30 November 2011

Makro`s distribution centre to be expanded

Makro`s distribution centre to be expanded

Investec Property on Tuesday said it had secured the development rights for Makro's distribution centre in Midrand, north of Johannesburg.

The distribution centre is to undergo a massive refurbishment and development that will see the existing premises expand from approximately 16,000 square metres to 27,000 square metres.

Investec Property is a division of Investec Bank (INP, INL) and one of SA's leading property operations.

Makro, which operates within Massmart's (MSM) Masswarehouse division, required an expanded facility for its central distribution centre, ideally without having to relocate, as well as being able to keep the facility fully operational during the construction period.

Investec Property, through its relationship and engagement with the tenant and the existing owner of the property were able to provide a creative and entrepreneurial solution to meet the client's exact needs, it said.

The current distribution centre will be transformed into a modern facility and will include an additional 11,000 square metres of warehousing space.
Improvements to the site will include an expanded yard area and a new perimeter ring road to facilitate more efficient vehicular movement.

The fire control systems and sprinklers will also be upgraded during this process maintaining a strong focus on safety.

"We were able to provide a long term warehousing solution to accommodate Makro's requirements. We are proud of our contribution to this important development for one of SA's major retail groups," Investec Property's David Rosmarin said.

Doug Jones, Masswarehouse commercial director, said it was particularly important for the group that its current operating capacity was not compromised during the building phase, so that it could continue to ensure that its customers' needs were met without interruption or unnecessary cost.

Construction has commenced on the facility, which will be delivered by the end of July next year.

Where to for property in 2012?

Where to for property in 2012?

No one could claim that the South African property market has done well in 2011. Sellers are finding that their estimated prices need to be lowered; buyers are eager but struggle to buy with banks hesitant to approve home loans. The result is that the market suffers and speculation is rife as to how long this downturn will last.

While the debate is relevant it is only so in the short term. This is because property really is a long term investment and seen from this perspective the current market down-turn takes on a different level of importance.

One mustn't forget that for most South African households owning a home equates to a good investment and stability which in the long term is not overly affected by the international drama. Consumers being transferred or being in need of up or downgrading or all the other good reasons for buying or selling, can do so under any market conditions. For the run of the mill property owner life goes on, for the investor the short term market remains depressed.

Those buyers who plan to sit on their newly purchased properties for the next four to six years will not be overly affected by the current property maelstrom. It also remains true that while the property market fluctuates in the short term, long term prices continue to increase. As such, those in the know still recommend buying, if you can afford it now and you can afford to sit on the property for a period.

That being said, the current market has far from recovered. It is a seriously ill patient. All indications are that the patient will recover - given the right medication such as the government's R1 billion mortgage-backed insurance fund. The National Housing Finance Corporation (NHFC) chief executive, Samson Moraba, confirmed last week that the fund will be operational by October 2012 and will aim to galvanize banks into approving more home loans.

While it is true that our banks were largely exempt from the international banking woes the current global situation has made them more skittish than usual. The insurance fund will hopefully ease their concerns through mitigating the risk to banks by being "a wholly owned subsidiary of the NHFC but registered, licensed and regulated by the Financial Services Board in terms of compliance with the regulations and its solvency requirements", says Moraba (as quoted in a Business Report:)

According to the same report Marius Marais, the chief executive of First National Bank (FNB) Housing Finance, is of the opinion that the fund could decrease the cost of mortgage insurance as all mortgage bonds would be pooled into one and the risk shared on a bigger portfolio base.

Other positive indicators are: the downward trend in the ratio household income versus debt which peaked at 82% but is now in the upper 70%. This is a positive sign but is still far too high (although much better than most first world countries at present!). The patient is getting the right treatment - household debt is coming down and the interest rates are stable.

There is however a few risk factors that need to be dealt with. Firstly the fact that the current international, financial crisis looks to be far from over with analysts and citizens alike waiting with baited breath to see if Italy will be able to make its debt repayments.

Secondly, we have our own political hot pot brewing with the leadership struggles in the ANC which are set to intensify in 2012. Anyone who witnessed the impact of the Polokwane conference knows the potential for market unrest during this period.

All being said and done does it mean potential property buyers need to wait? Not necessarily says John Loos as quoted in Moneyweb: “it’s important, I think, in these tough times to buy well within your means. Yes, some do still believe interest rates will go up later this year or early next year and ultimately interest rates always do go up. But it’s not only about that, it’s also about all the costs being heaped on to housing, we know about Eskom and we know about municipalities. So, in these tough economic times, tough financial times, I think it’s always good to buy within one’s means if one is entering the property market.”

And that seems to be the best advice for the moment – by all means buy property yes; in the long run it will be a valuable investment. But, buy within your means and take a long term view. Investors seeking to make a quick buck might want to think twice.

*Bruce Swain is the Managing Director of Leapfrog Property Group.

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Mall of the North in Polokwane, Canal Walk Shopping Centre in Cape Town, Cape Union Mart Adventure Centre at Canal Walk and Supercare Cleaning Services at Paarl Mall have all claimed top honours at the annual South African shopping centre industry awards.

The Spectrum Awards recognise excellence, innovation and service across four categories which underpin the retail centre sector in South Africa. An initiative of the South African Council of Shopping Centres (SACSC), finalists for the Spectrum Awards comprise winners of the regional Special Star Retailer and Service Provider Awards, the Footprint Marketing Awards and the Retail Design and Development Awards (RDDA).

Retail plays a vital role in the SA economy and shopping centres are at the heart of this significant economic activity. Furthering excellence in retail is of wide benefit and represents vast positive outcomes for consumers, retailers, shopping centres, service providers and the economy in general.

Mall of the North in Polokwane, Limpopo, scooped the prestigious Spectrum Retail Design Development Award, much to the delight of architect MDS Architecture and the centre’s joint owners and developers, JSE-listed Resilient Property Income Fund, Flanagan & Gerard Property Development & Investment and Moolman Group. This is the second consecutive year in which the team of MDS and Flanagan & Gerard have clinched this award.

The Spectrum RDDAs recognise exceptional shopping centre design, combined with economic success, within the South African property industry. Finalists for this award included Jubilee Mall in Hammanskraal, Pick n Pay on Nicol, Eastgate re-positioning phase one and the store design of Tasha's at The Zone @ Rosebank.

Nedbank Corporate Property Finance is the principal sponsor of the RDDA awards in 2011. “We are pleased to play a role in industry events such as the RDDA Awards. This involvement allows us to celebrate the hard work that goes into property design, as this is a discipline that brings together creative and commercial elements in the design and construction of retail space to the benefit of consumers,” says Frank Berkeley, Managing Executive of Nedbank Corporate Property Finance.

Cape Union Mart Adventure Centre at Canal Walk Shopping Centre in Cape Town triumphed in the National Retailer of the Year Award, delivering first-rate service. Category finalists included Dis-Chem La Lucia Mall in KwaZulu-Natal, SuperSpar Sunridge Village in the Eastern Cape and Fruit & Veg City Food Lovers’ Market at The Wedge in Gauteng.

Holding the spotlight, Canal Walk’s ‘Snow’ marketing campaign by Marketing Concepts won the Spectrum Shopping Centre Marketing Excellence Award 2011, the hotly-contested category which celebrates excellence in shopping centre marketing.

Regional finalists from KwaZulu-Natal included ‘Sugars The Bitter Truth’ at Chatsworth Centre and ‘The Pavilion contributes towards the building blocks of education’ at The Pavilion. Wonderpark Shopping Centre’s ‘Please donate your Small/Big/Brown/Silver Change’ represented the Gauteng region. In addition to the winner, Western Cape finalists comprised ‘J&B Met 2011’ at Cavendish Square, Canal Walk ‘Gets Social’ and ‘Growsmart’ which is undertaken at four Growthpoint Properties’ centres in the province, being The Constantia Village, Longbeach Mall, Golden Acre and Middestad Mall.

Making sure that our shopping centres remain attractive and safe are the industry service providers and this year Supercare Cleaning Services cleaned up in the National Service Provider of the Year category and won the Spectrum Award for its services at Paarl Mall.

Other smart finalists in this category included Prestige Cleaning Services at Gateway Theatre of Shopping in KwaZulu-Natal, Marina Landscapers at Fountains Mall in the Eastern Cape and Life Landscapes at Lifestyle Garden Centre in Gauteng.

The strong pack of entries in 2011 an excellent indication of retail sector innovation and business savvy in South Africa. It also shows the respect in which the highly coveted Spectrum Awards are held by the industry.

*Amanda Stops is the General Manager of SACSC.

29 November 2011

Liberty Properties to expand into east and west Africa

Liberty Properties to expand into east and west Africa - Property Moneyweb

Follows the successful launch of a $200m mall in Lusaka.

The property arm of JSE-listed Liberty Holdings (JSE:LBH) says the entity is looking to east and west Africa as possible destinations for development. Liberty Properties successfully launched a mixed use development comprising a 30 000m² upmarket mall, a 10 000m² office park and budget hotel in the Zambian capital, Lusaka, earlier this week. The Levy shopping centre is named after former Zambian president Levy Mwanawasa.

Liberty Properties’ CEO Samuel Ogbu says the company hopes to launch a project in west Africa within the first half of 2012. Ogbu said after the Zambian launch: “We’re looking at west Africa , we’re looking at east Africa. We’re looking at doing another one of these projects in Zambia, possibly in the copper belt. It doesn’t’ make sense just to do one. Zambia has been identified as one of the growth areas and we are also under pressure from retailers to grow capacity for them.”

In west Africa Liberty currently has its sights set on Nigeria and Ghana, while Kenya and Tanzania are its main focus in east Africa. “We’re not at a stage yet to tell you that a site has been identified and we’re ready to go. We need to be very cautious of who our partners are because the one thing we are not willing to do is to compromise on delivery,” Ogbu said.

The CEO said that further developments in Africa will be based on the Levy model but will obviously be tweaked in line with the needs of the destination chosen. “We want to build capacity which is actually cheaper in the long run than to keep flooding the place with expats. You do need the expatriate expertise to start, and you do need to ensure the standards are complied with and at times it does take time to build capacity. South Africa does add value but for it to be sustainable, you need local partners to play an active part.”

Liberty’s first foray into Africa was indeed a learning curve for it and other stakeholders, and the approach was unique. The aim was to build a facility in line with the needs of the community together with the input of local businesses and local authorities. It wasn’t all plain sailing as Ogbu explains: “We were very hands on and was guided by the client (funder, Zambia’s National Pension Scheme Authority). We were dealing with a different set of rules. Local authorities are set up to protect their citizens. Wwe had to learn their rules and make sure we complied with them.”

The realities of Africa and its lack of infrastructure also impacted the Zambian project as the arrival of goods for some tenants were delayed for five weeks due to border problems. Shipments were stuck at the Zimbabwean border due to computer glitches. Trying to get the goods through via Botswana also experienced problems. Shrugging his shoulders, Ogbu says: “I’ve learnt a new phrase: just roll with it.”

Another encouraging element of the Levy project was the partnerships formed between South African professionals and their Zambian counterparts, which was a prerequisite of the funder. Ogbu explains: “It worked through the procurement process and was part of the tender process. We made it clear it was not a question of merely getting a local face to a South African provider. There had to be effective input from a local partner, which meant that local partner had to have the capacity to deliver. It made the process longer and it made it a bit frustrating at times, but in the long term it leads to a much better result. It leads to a true transfer of skills and building capacity in the local market which I think is essential for a sustainable offering and is the difference between the approach that makes you welcome and not an intruder.”

He says the journey for some of the South African contractors had not been easy: “The temptation is there for the skilled South African partner to say stand aside, let me do it. But we said no, no, no, you’ve got to take that person along with you.”

In instances where there were differences of opinion on building techniques, Ogbu said: “If it’s the way they build there, you have to persuade them why yours is better. Even in the design phase there was a problem when it became clear local capacity was inadequate. We said okay let the South Africans do it, but we had to find a way to skill them.”

The mall manager is Zambian with a technical back-up team of South Africans who are partnering with locals who will eventually take over the running of the facility.

On a lighter note, Ogbu says cultural differences also provided several challenges notably when stakeholders were invited to a “roof wetting”. “We had to explain what it was before they would come.”

Ogbu says what is clear is that Africa is hungry for an upmarket shopping experience.

23 November 2011

What your rights are with 'prescribed debt'

What your rights are with 'prescribed debt'

Is a debt collector hounding you via letter, e-mail or SMS to pay a very old debt you can barely recall? If so, you need to get clued up on the term "prescribed debt".

In short, according to the Prescription Act, if in the past three years you have not made any payment towards settling a debt, acknowledged owing the debt in any way - including over the phone, agreed to pay it or been summonsed in respect of it, it has prescribed, and you can raise this as a defence when asked to pay it.

This excludes mortgage debt, taxes and any staterelated debt such as a television licence.

But here's the thing: it is perfectly legal for a debt collector or attorney to demand payment from a debtor for a prescribed debt, and if you succumb to the pressure and pay it, you can't raise the defence of prescription afterwards.

In other words, if you don't realise the debt you're being asked to pay has prescribed, and you pay it, you lose.

The idea was to compel creditors and their collecting agents to collect money owed to them within a defined period, to protect consumers from unscrupulous creditors and/or collectors who intentionally delay the recovery of their debt so that it accumulates massive amounts of interest and costs.

Of course, the debt-collecting industry argues that the act was never designed to give people an excuse not to pay their debts, as this would be morally wrong.

There is some merit in that argument, of course, but what's also morally wrong is for a collector to contact a consumer many years after an alleged default and demand that they pay a sum which they refuse to substantiate.

A firm notorious for doing just this is JM Attorneys of Randburg, which continues to hound former Health & Racquet Club members for payment of subscriptions allegedly owed to the group, which went into liquidation about 10 years ago.

Many debt collectors go into "pay up" overdrive in November and December, presumably hoping to snare a share of their targets' end-ofyear bonuses.

I've heard from three former Health & Racquet Club members in recent weeks, all of whom have received fresh demands from JM Attorneys on behalf of the "client".

Dylan Mcgarry was 16 in 1999 when he was given a limited free membership to H&R as a thank you for recruiting other members.

He was under-age at the time and could therefore not have signed a legal contract. Even if he had done so, and then failed to pay, that debt would have prescribed many years ago.

Still, JM Attorneys is demanding payment, based on a contract which is, in fact, a "physical activity and readiness questionnaire" which McGarry was asked to sign.

Now 29, he received a letter from the firm, dated October 17, headed "Negative Impact on your Future Job".

It reads: "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?

"You are making this difficult for yourself if you do not pay your Health & Racquet Club debt on or before 31 October, 2011."

His mother, Kathy Bennett, told Consumerwatch the first letter from JM Attorneys came on ominously bright red paper, in January last year, followed by another four since.

"And they are adding R37.34 to the alleged debt for the cost of every letter," Bennett said. The latest sum being demanded is a few cents less than R2 000.

"To receive that first red letter was horrifying, firstly that it was so long ago, and especially knowing that there was no debt in the first place."

The implied threat of blacklisting had rattled both of them, Bennett said, "as Dylan has studied and worked extremely hard at getting his PHD, on scholarships".

In another case, Michael Maphutse of Joburg paid his H&R debit order for 24 months, despite visiting the Watermeyer branch just twice, and never heard from the club after that. Then the company liquidated.

His first demand for payment from JM Attorneys came in 2006, and his most recent communication was via SMS on November 4.

Despite asking for a copy of his H&R contract and proof of arrears in two e-mails in 2006, he did not get a response.

Then this month he received a fax putting the burden of proof on him - he was asked to provide a host of documents as proof of the cancelled contract, acceptance of such cancellation, an affidavit and more in order to prove his claim not to owe any money.

I wrote to JM Attorneys' managing director, Gert Visser, setting out these two cases, plus a third, and asking, among other things, why the Mcgarry file had not been closed given that no contract existed in the first place, and why the firm continued to pursue consumers for payment when they had raised prescription as a defence, and the firm was unable to prove that this was not a valid defence.

I was asked for reference numbers for all three cases but Visser began his written response by saying that "we" would not comment on each case "as there are attorney/ client confidentiality requirements that we must not violate".

"The law of prescription was… never designed to provide a mechanism to attempt to evade liability and we are really not sure why you are suggesting that merely after an elapse of time somebody may attempt to evade payments of debt and why you seem to suggest that this is proper behaviour when we surely all know that a person must honour their obligations," Visser said.

He said that any threat of "blacklisting" was contrary to company policies "and we absolutely do not do so".

"It may be your understanding was incorrect and that you inadvertently thought that we might give adverse information to credit bureaus," he said.

Well, yes, when Mcgarry got that letter last month, headed "Negative Impact on your Future Job", followed by the words "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?", he might have "inadvertently" thought the firm was threatening to have his credit record "blacklisted".

Incidentally, according to the Credit Ombud, prescribed debt may not be listed on a person's credit record.

I'm not suggesting people should avoid paying their debt. But this is precisely the sort of "very old debt" scenario the Prescription Act was designed to protect consumers from.

In any event, the onus is on the person demanding the money to prove that it is owed, and to substantiate the amount being demanded, which has not happened in these cases.

I'd encourage consumers to use their bonuses to settle their current outstanding debts before spending it.

Wendy Knowler

Pretoria News

'Will the Consumer Protection Act make the voetstoots clause redundant?'

'Will the Consumer Protection Act make the voetstoots clause redundant?'

With the Consumer Protection Act now making it even more essential that the seller of a home declare openly any defects of which he is aware, it has been said by some estate agents that the voetstoots clause is now becoming redundant - the repair of almost any defect in the home discovered after the transfer of the property can, it has been said, now be claimed for.

Not so, says Anton du Plessis, CEO of the Cape Peninsula central southern suburb estate agency, Vineyard Estates.

Quoting a recent High Court case (Banda and Another vs van der Spuy and Another), du Plessis said this reinforced the voetstoots principle that, if the seller was not aware of the defect, he cannot after the sale be held responsible for it.

"In the case referred to," said du Plessis, "the van der Spuys sold their home to a Mr Banda. About one year prior to the sale, severe storms had damaged the roof and caused leaking. The insurer then paid for comprehensive repairs to be carried out and these were guaranteed for six months by the thatcher. The van der Spuys also informed Mr Banda of this and of the six month warranty.

"Subsequently, heavy winter rains (the home is in Villiersdorp, Cape) fell and the roof again leaked."

At the subsequent trial Mr Banda produced a specialist witness with extensive thatching experience who testified that the problem arose from a latent defect. This was that the 26 to 35 degree pitch of the roof was not steep enough to make the thatch efficient. It had, he said, to have a 45 degree pitch.

The judge, after listening to the technical backup to this statement, accepted its validity - but, he said, the sellers and their agent themselves being unaware of this, could not now be penalised on account of it - and, as the house had been sold voetstoots, the buyer had no claim on them. The sellers had been aware of the defects, had had them repaired and could therefore rightly consider themselves in the clear.

Du Plessis said that it had to be acknowledged that throughout SA legal history, sellers have "hidden behind" the voetstoots clause but in this case only an expert would have recognised the defect and the seller could not be blamed for it.

The voetstoots clause, therefore, could be enforced.

"What is interesting," he said, "is that I would guess that a significant percentage of thatched roofs in South Africa (perhaps 15%) do not have 45 degree roofs but most get away with it because they are not in high rainfall areas. House buyers looking at thatched homes should check the pitch and sellers from now on are advised to warn buyers in advance if the pitch is possibly inadequate."

Trudie Broekmann, a director of Gunstons Attorneys in Tokai, added that if the house was sold subsequent to the CPA becoming effective on 31st March 2011, the estate agent might well have been regarded by the court as a supplier of the property and would have been liable for the defect. Agents, she said, will not, like sellers, be protected by the voetstoots clause.

Vineyard Estates Press Release