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PRETORIA, GP, South Africa
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30 April 2014

New property owners held liable for defaulters’ dues

This is an Article from the Moneyweb website.

The comments in the Comment Section appearing below the article on that website are extremely illuminating and there are two specific aspects that I would like to highlight.

1. Why would anyone invest in property in a municipality where the Clearance Certificate issued by the municipality is basically worthless as an indication of the status of the account?

2. Why are the relevant municipal officials not being held in Contempt of Court?

If you are experiencing similar problems, remember that for all of your property questions, Shepperson Attorneys is the answer!

Gareth Shepperson
Commercial and Property Attorney

New property owners held liable for defaulters’ dues

Tshwane tries to make new owner pay the old owner’s municipal account.

The City of Tshwane Metropolitan Municipality (CTMM) recently refused to supply basic municipal services, such as electricity and water to a wheelchair-bound Fredah Kekana, a Tshwane homeowner.

It demanded that she pay the arrears owed to it by the previous owner of her property. The CTMM was unmoved by Kekana’s disability and the fact that the debt that it was demanding was not hers in the first place.

How municipal rates clearances work

Before any property can be transferred from one owner to another, the outstanding amounts owing to the local authority for the preceding two years must be paid in full. If this is not done, a municipal rate clearance certificate cannot be obtained. Without the rates clearance certificate, the new owner cannot take transfer. This is according to section 118(1) of the Municipal Systems Act (MSA).

The purchaser of a property should rightfully be able to rely on a rates clearance certificate given to the previous owner as absolute proof that all arrears have been paid.

Not according to CTMM, which now seeks to hold new property owners accountable for municipal debts they did not incur. The CTMM relies on an interpretation of the “security” provision, contained in section 118(3) of the MSA. It states, “An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property.”

Fredah Kekana

A Mr & Mrs Oosthuizen, the previous owners of Kekana’s home, northwest of Pretoria, were unable to repay loan to S A Home Loans, and so the Sheriff sold the property in terms of a court order. Kekana paid R668 000 for the property. In October last year, prior to transfer taking place, Tshwane suddenly demanded that she pay it R56 100.

New Ventures

Kekana sought the assistance of Johannesburg-based New Ventures Consulting Services. (NVCS), a firm that specialises in auditing municipal accounts and ensuring clients pay municipalities what is owed rather than what is claimed by them. Municipal accounts are notoriously inaccurate and are often hugely overinflated.

Incorrect calculation

NVCS analysed the CTMM rates and service charges account presented to Kekana, and found an overcharge of R36 460. Kekana only owed R19 650. They presented their analysis to the CTMM, which approved the lesser figure and, in December last year, issued a rates clearance certificate to the Sheriff. This meant that the property could now be transferred. Having issued the rates clearance certificate, the CTMM then refused to enter into a consumer agreement with Kekana on the grounds that Mr & Mrs Oosthuizen owed it R36 500 (being the R56 000 less the R19 000 paid to obtain the clearance certificate).

A consumer agreement entitles you to municipal services.

High Court application

NVCS had three other clients who were in a similar predicament. NVCS indemnifies its clients against charges, whom it says do not owe the municipality the amounts claimed. It took its clients’ case to the North Gauteng High Court (NGHC) on an urgent basis. Relying on Section 38 of the South African Constitution, it told the court that it had decided to act on behalf of a class of similarly “affected municipal service consumers.”

NVCS Director, Costa Livanos told the court, “These consumers are being denied municipal services by the municipality's unlawful implementation of a practice of refusing to enter into consumer agreements with new owners on the basis of an outstanding historical debt incurred by previous owners.”

“As will appear from this affidavit, the Municipality's failure to render municipal services appears to be based on financial issues, and its failure to act diligently and expeditiously against previous defaulters. The applicants herein cannot lawfully be held liable for amounts due by such defaulters.”

Livanos also told the court that the CTMM had failed to ask the Sheriff to recover all arrears owed by the Oosthuizens.

Court records reveal that NVCS had repeatedly reminded the CTMM that it was the metro’s legal responsibility to collect all other historical debt on the property. CTMM did not do so, and has now tried to make it Kekana’s problem.

Court order

On February 18 2014, CTMM consented to a court order to immediately provide municipal services to Kekana and the other applicants.

Kekana handed the court order to CTMM official, Tienka Abbott, who referred it to her superior, Ronny Shilenge.

According to Kekana, Shilenge was dismissive of the court order. He apparently said Kekana must pay R5 000 of the Oosthuizens debt, and then enter into an agreement to pay off the balance of their debt in instalments. Abbott told her that only then would Shilenge allow her to enter into a consumer agreement with the CTMM.

NVCS attempted to discuss the effect of the court order with CTMM officials. They refused to do so. In order to resolve the impasse, NVCS paid R5 000 on Kekana’s behalf under protest in order to ensure that municipal services were restored to her.

Municipal deception

Early last month the CTMM sent Kekana an acknowledgment of debt (AOD). She was required to acknowledge liability for an amount of R37 760, which it said that she had to pay off over 48 months. Moneyweb has seen her municipal account of the same date. It reflects a credit balance of R1 775.

Kekana believes that the CTMM attempted to deceive her. The matter will be back in the High Court later this year.

No response to Moneyweb’s request for comment had been received from Abbott or Shilenge at the time of publication.

CTMM spokesman, Blessing Manale, told Moneyweb: “The City has invoked its right not to comment on the matter as it involves possible litigation. We therefore confirm that we are aware of this matter and both our finance and legal departments are attending to it.”


Gareth Shepperson
Commercial and Property Attorney

23 April 2014

Leatherman Visits the Shepperson Ranch

'The 4 main reasons why banks decline mortage applications'

It is interesting that amongst the 4 "MAIN" reasons, Number 4 is that (in the Bank's view) the property is overpriced.  The article goes on to say that this is the case in less than 1% of declines.  Therefore I don't think it is a "main" reason and perhaps the article should have been titled: 'The 3 main reasons why banks decline mortage applications' ... just saying?

Gareth Shepperson
Commercial and Property Attorney

'The 4 main reasons why banks decline mortage applications'

Almost 30% of all declines from the banks come about because the credit bureaux have data showing that applicants have, at some stage, had a court judgement against them.

However, it is surprising how often clients are not aware that these matters are recorded, says Mike van Alphen, National Manager of Rawson Finance.

Similarly, said van Alphen, the credit bureaux often have on their files in-depth records of arrears on credit accounts. These impaired or blemished records, said van Alphen, quite often do not relate to significant amounts but they will be cause enough for the bank to decline their application.

Such situations are likely to be greatly improved by the new ruling that paid up judgements and debts must be deleted from all records. Potential borrowers in all categories, said van Alphen, should make use of the one free personal credit report per annum, to which every South African citizen is entitled, by which they can gain the latest information on their credit position. To do this, the applicant should visit www.mytransunion.co.za.

'We are,' said van Alphen, 'hearing rumours that certain paid up credit accounts, which were formally in arrears, are still listed by the Credit Bureau. However, the credit bureaux have been given just two more months to de-list any such accounts and after that there should be no further trouble in this respect.'

A second major reason for declines (in 25% of cases) is affordability. In these cases the banks simply do not accept that the applicant's income justifies him for the loan he wants.

'Here,' said van Alphen, 'the clients themselves may be to blame because they have failed to reveal the full extent of their commitments, which are often payable monthly. We find on examining their bank accounts that they have simply forgotten to reveal such regular salary deductions as their life, health, pension and insurance payments, retail accounts, cell phone accounts, credit cards, hire purchase deals and personal loans.'

When applicants hold back on these details, said van Alphen, it may simply be because they lack clerical skills or have forgotten certain items. Alternatively they may be hoping that the credit bureaux may not pick up information of this kind. This is very unlikely as the efficiency of the bureaux is widely known.

A third reason for the rejection of loan applications, said van Alphen, is what is known as 'poor account conduct'. This covers certain internal banking matters such as RD cheques, unauthorised overdrafts and an abuse of any kind of the banking system.

A fourth reason for rejections may be that the banks view the property as overpriced - i.e. not sufficiently valuable to justify the loan for which the applicant has asked. This, however, happens very seldom, probably in less than one percent of rejections.

Rawson Finance Press Release

Gareth Shepperson
Commercial and Property Attorney

Credit amnesty's impact on the property market

As the saying goes: "The proof is in the pudding!"

We will see whether tighter lending criteria by the banks will offset any possible advantage to credit applicants.

Gareth Shepperson
Commercial and Property Attorney

Credit amnesty's impact on the property market

This month saw credit amnesty come into effect, which will essentially ensure that certain negative financial information is removed from consumer's credit records at credit bureaus.

The aim of the amnesty is to reintroduce those consumers who have previously been unable to apply for credit due to negative listings, back into the market. While this is welcome news for those consumers as it provides them with the opportunity to once again access credit, it could come at a much higher cost. This is according to Adrian Goslett of RE/MAX of Southern Africa.

'Previously banks would base much of their credit rating models on a client's payment history, which will be far less detailed without the information provided by credit bureaus. Without access to this potential adverse information on a consumer's payment profile, it will be far harder for financial institutions to determine their risk or the applicants' ability to repay their credit. As such they will have to adjust their approach and methods of distinguishing between high and low risk lenders,' says Goslett. 'This could result in the opposite effect that the credit amnesty was initially introduced to achieve in that if banks feel that they are acting within a higher risk environment, they will be far more cautious in reviewing applications, and will therefore be tightening up their lending criteria and could in fact grant less credit.'

Bank representatives have gone on record saying that that the removal of the adverse credit records of consumers introduced unknown risk and agreed that in light of this, banks have to tighten their approach to risk. The assumption that the credit amnesty will make it easier to obtain credit is not entirely true as many credit providers will implement a far stricter credit vetting processes.

Goslett notes that if the credit amnesty results in fewer loans being granted, coupled with the fact that consumers are already facing other external financial pressures such as the rising cost of living, it could result in the property market slowing down. 'Faced with greater risk, banks are likely to also push up the cost of credit and lending rates on home loans as a protective measure. Consumers already have deposit requirements to contend with and further interest hikes predicted later this year, so even more additional costs will only keep them from the property market for longer,' says Goslett.

While the credit amnesty applies to information retained by credit bureaus it will not affect the credit information that banks currently have on their existing clients. 'Amnesty will have more of an impact on a bank's new clients; however most banks will have retained their own record of their existing client's payment profile and credit history, which they will take into consideration when looking at credit applications. The bank will have records of negative payment history, so removing adverse information at the credit bureau will not entirely clear a consumer's name. Credit providers will still be allowed to keep the adverse information on their databases, whether it has been removed from a credit bureau or not,' says Goslett.

The information of current credit-active consumers will still be retained by credit bureaus and will be made available to credit providers, so the amnesty will only impact consumers who do not have credit at the moment. There is also certain credit information that is exempt from the amnesty that will not be removed, such as SARS judgements, administration and sequestration orders, rehabilitation notices and debt review.

'While the amnesty will have an impact on some consumers, for others it will be business as usual. Those who want to purchase property in the future will still need to pay down their debts in order to increase disposable income and continue to save for a deposit before deciding to apply for a home loan,' Goslett concludes.

RE/MAX Press Release

Gareth Shepperson
Commercial and Property Attorney

11 April 2014

Waterfall Estate property development to transform Midrand

Waterfall Estate property development to transform Midrand

The Waterfall Estate in Midrand, which the developers claim is the largest property development in the country's history, will have an estimated positive economic impact valued at about R106 billion by the time it is completed in 2023.

Willie Vos, the chief executive of the Waterfall Management and Operating Company, said yesterday this was the finding of a study done by Urban Studies.

Chinese group`s R84bn Modderfontein plan

Chinese group`s R84bn Modderfontein plan

Set to transform Modderfontein and benefit South Africans.

The stereotype that Chinese businessmen exploit smaller countries through their investments in land, which has led to their integrity being tainted, needs to be dispelled.

This was the stern warning sent out by Gauteng Premier Nomvula Mokonyane on the R84 billion Modderfontein infrastructure development of residential, industrial and commercial space by Chinese developer Shanghai Zendai.

“Whatever has been said about the people of the Republic of China and their role in foreign countries has been done by those who always see the Chinese as competitors,” says Mokonyane.
Gauteng Premier Nomvula Mokonyane, founder and chairman of Shanghai Zendai Dai Zhikang toast to the R84-billion development of Modderfontein into a commercial and residential node.

This was said in light on a new development to the east of Johannesburg. Over the next fifteen years, the small town of Modderfontein will be transformed into a city which could rival Sandton, the richest square mile in Africa, with its financial trade centre, basic education facilities and low cost housing units.

Shanghai Zendai acquired 1 600 hectares of land for R1 billion from chemicals group AECI last year and as of next year the project called Zendai Modderfontein, unveiled on Wednesday, the development will be rolled out.

Focusing on social development

At the remote site where the development is set to take place, the Chinese developers were on a mission to assure stakeholders that the Modderfontein investment will also see social development for South Africans.

Shanghai Zendai faced heat earlier this year from stakeholder groups during the AECI property transaction at the Competition Commission, who voiced their concerns about the project’s ability to create sustainable jobs and benefit the local economy.

The latest development of a university called the University of Africa to come out of the Modderfontein project by property developer Shanghai Zendai

Zhikang attempted to allay fears by saying: “Zendai South Africa (the local arm of Shanghai Zendai) has 200 employees and in three years’ time this figure will be ten times [as much]. In 20 to 30 years (once the development has been completed), 300 000 people will be working and living in this community”.

Over the next three years, chairman and founder of Shanghai Zendai, Dai Zhikang says an envisaged  low cost housing development will support the commercial node in Modderfontein.

The development, Mokonyane says, will target and improve the lives of the black middle class and people in Alexandra township who live closer to the development by becoming part of the development.

Also in the pipeline are “five to six” schools in the area; the focus on basic education is in a bid to address South Africa’s education facilities deficit.

As the roll-out of infrastructure continues, a university is on the property developer’s radar which will be called the University of Africa.

Agreements were signed between companies, largely construction firms, which have partnered in the development of Modderfontein. The companies include China Exim Bank, Longxin Group, PCCW.

Another concern was whether local companies will have a hand in the development, to which the Chinese vice consul-general to Johannesburg Peidong Yang says the development is open to partnership with local companies.

In response to concerns, Zhikang is confident that all environmental impact studies have been completed and now [wants] to start erecting buildings.

Source of financing

The source of funding, Zhikang says, will be in collaboration with the Bank of China, while the remainder of the investment will come from his pocket.

“We (the Chinese) are about an investment culture and the Bank of China has given us a low interest loan to start special economic zones. We are looking at other banks to pledge,” Zhikang says, adding that the first phase of the project will be R3 billion.

Not mentioning any specific amount, Mokonyane says the city will fork out costs relating to installing municipal services such as the supply of electricity and road infrastructure to the development.

Agreements were signed between companies, largely construction firms, which have partnered in the development of Modderfontein. The companies include China Exim Bank, Longxin Group, PCCW

Pushing the Chinese agenda

The planned financial trade centre, where the focus will be the manufacturing of goods to be exported to the rest of Africa, will further enforce South Africa’s economic ties with China, that’s if CEO of Shanghai Zendai CEO Wang Fujie has his way.

Due to Modderfontein’s proximity to transportation nodes such as the OR Tambo International Airport, Fujie says Johannesburg is “relatively mature with its manufacturing sector”.

“We firmly believe that the trade and logistics project will enhance the economy of Johannesburg…. We want to get support from government, so we can build this plant to process goods to be exported to Africa and use local labour,” he says.

Part of the investment is to strengthen trade relations, as Fujie reiterated that “China is South Africa’s largest trading partner in import and export volume, which last year reached $60-billion”.


For all of your Property Developments (big or small) - give us a call.
Gareth Shepperson
Commercial and Property Attorney

The painful process of collecting outstanding levies

Shepperson Attorneys represents both Home Owners Associations (HOA's) and Body Corporates throughout Gauteng.  We can take all your headaches away including the issue of arrear levies described below.

We have a variety of options available depending on the size and nature of the Development/Complex, so contact us and we'll customize a solution for you.

Gareth Shepperson
Commercial and Property Attorney

The painful process of collecting outstanding levies

The process of collecting outstanding levies is so arduous and lengthy, it should be avoided at all costs says Michael Bauer of IHFM.

On establishing that the levies in arrears (when it exceeds R3 000) are not going to be paid by the stipulated date, an attorney will be appointed.

Construction to start on 'new city to rival Sandton'

Construction to start on 'new city to rival Sandton'

The construction of a 'new city to rival Sandton' in northeastern Johannesburg kicks off early next year with Shanghai Zendai Property's R84 billion development of the Modderfontein property it bought from AECI.

It will include the building of schools, a university and a contemporary African art gallery.

An artist's impression of Shanghai Zendai Property's planned R84bn 'new city' in north-eastern Johannesburg.

Dai Zhikang, the founder of Shanghai Zendai Investments, said the group planned to build a 'new city' over the next 15 years that would focus on the retail and residential sectors.

08 April 2014

No permissions, no plans obtained before mall collapse

No permissions, no plans obtained before mall collapse

Developers of the Tongaat Mall outside Durban, which partially caved in last year, failed to obtain permission to demolish the existing building before construction began, a commission of inquiry heard on Friday.

This was in addition to the failure to have the earthworks and building plans approved by the eThekwini metro municipality.

Mortgage bond defaulters cause banks to tighten loan criteria

Mortgage bond defaulters cause banks to tighten loan criteria

A recent National Credit Regulator report says that in the third quarter of 2013 approximately 70,000 South African home owners were 90 or more days behind in their mortgage repayments.

The report added that defaulters owed the banks about R38 billion, which is just over 12 percent of the total home loans of R308,9 billion.

07 April 2014

Ambitious property developments in pipeline for Tshwane

One can only hope that the Vision translates into reality with an absolute minimum of collusion, corruption, nepotism and cronyism.

Good ideas need to be applauded but "the proof is in the pudding" ... as they say.  I am a BIG proponent of densification (as any reader of this Blog will have realised) but the time and cost over-runs that seem to accompany all projects involving the State (National, Provincial & Local) due to self-interest and self-gratification in any way possible worries me a bit because we will untimately get stuck with the (inflated) bills.

Please Tshwane - my city ... project manage these improvements and deliver projects that we can be proud of.

Gareth Shepperson
Commercial and Property Attorney

Ambitious property developments in pipeline for Tshwane

Within a few years, Tshwane's inner city could be unrecognisable with ambitious development plans that will transform its skyline and create a vibrant and efficiently-run city.

City trumps province on municipal zoning decisions

The much debated Spatial Land Use and Management Act (previously called SPLUMB) was enacted fairly recently and once the various Regional Planning legislation (like the Western Cape Land Use Planning Act referred to in the Article) is adopted, I really hope that we will have greater legislative certainty.  The hodge-podge of legislation that has existed up until now has certainly caused much uncertainty.

I wrote an article for Asset Magazine some time ago (July 2013 issue) on this topic.  You can view the Article HERE.

Gareth Shepperson
Commercial and Property Attorney

City trumps province on municipal zoning decisions

The Constitutional Court has curbed the power of provinces to overturn municipal land zoning decisions, declaring a loophole which had allowed developers to appeal to the province against municipal decisions to be 'unconstitutional and invalid'.

This means municipalities - such as the City of Cape Town - have the final say on how land inside their boundaries is developed.

Menlyn casino decision by end of July

I have previously commented on this issue.  See my comments HERE.

Nothing contained in the latest submissions by objectors serves to sway my thinking and I therefore remain of the opinion that the Pro's far outweigh the Con's.

Your comments are welcome if you have a differing view.

Gareth Shepperson
Commercial and Property Attorney

Menlyn casino decision by end of July

Sun International, its rivals and Tshwane residents will know by end of July if the Menlyn Maine casino plan will go ahead.

Parties could still be invited to make submissions at the board's office in Joburg north if more clarity was required.

There were more questions than answers at the conclusion of the four-day public hearing into the application for amendment and transfer of Morula Sun licence from Mabopane to the new Menlyn Maine precinct in Pretoria East.

Property developer fights country estate's 'draconian' rules

Maybe it's just me but I believe that when you CHOOSE to live in a security estate, you do so willingly with a clear concept of the fact that your security and chosen lifestyle comes with certain restrictions.  If you don't want to subject yourself to these Rules and Regulations ... don't buy there!

It strikes me that the Plaintiff's daughter must be a "spoiled brat" (although I don't know her personally) based upon her actions.  In these estates, there are often children walking or riding their bicycles, elderly people out for a stroll and even golf carts crossing the "main" roads at various intersections.  The Plaintiff's daughter flagrantly chose to endager the lives of others on not one but three occassions.  No matter if you are a billionaire or just plain Joe Blogs, such arrogance is ugly.  The sense of entitlement and lack of consideration is unacceptable.

Having said that, the rules pertaining to domestic workers do indeed seem to be draconian. I accept the need to restrict access (for security) but once someone has been cleared to enter, to then place such restrictions on their movement smacks of the Pass Laws of old.

Still, I don't believe that the court case was sparked by a sense of injustice on behalf of domestic workers but rather by one peeved individual with resources whose nose was put out of joint when someone had the "audacity" to hold his daughter to account for her reckless actions.

Gareth Shepperson
Commercial and Property Attorney

Property developer fights country estate's 'draconian' rules

A Durban businessman and self-proclaimed champion of the people, reputedly worth almost R1 billion, is fighting to overturn 'draconian' rules at the plush Mount Edgecombe Country Club Estate and this week took the battle to court.

A view of the golf-course at Mount Edgecombe

Nemesh Singh, a property developer who has lived at the complex for more than 10 years, filed papers that take a stab at the lush green hills, litter-free walkways and serenity of Mount Edgecombe Estate Two, dubbed 'Pleasantville' by wealthy residents.

Consumer Protection Act 'could be boon to dissatisfied customer'

When the Consumer Protection Act was first promulgated there was a scare-mongering and sensationalism about the dire consequences that it would bring about.  The property industry was no different and Estate Agents were singled out as targets for such scare-mongering.

A number of years ago, I addressed several groups of Estate Agents on the subject and highlighted the extremely limited circumstances that would lead to the Act impacting upon them.

Since this series of presentations, I thought that the sensationalistic reporting on this subject had died away.  However, it appears as if Mr. Bill Rawson wants to resurrect this topic.

If anyone would like me to dust off my old presentation and discuss this topic again at an appropriate forum, please let me know at gareth@prop-law.co.za

Gareth Shepperson
Commercial and Property Attorney

Consumer Protection Act 'could be boon to dissatisfied customer'

When the Consumer Protection Act was first promulgated many were worried that it would lead to regular post sale disputes in which the agent and the seller would be held responsible for any number of problems.

However, thus far this has not yet happened, says Bill Rawson, Chairman of the Rawson Property Group.