Plans to regenerate the inner city and to increase access to affordable housing for low-income families are being scuppered by corrupt landlords who exploit sectional title law to make quick profits.
Landlords buy up flats and install tenants from whom they collect rent and payment for municipal services; but they do not pass these payments on to the municipality or the building’s body corporate. Municipalities then cut off basic services like lights and water, despite tenants having paid. Body corporates often go bankrupt, allowing landlords to snap up buildings at knock-down prices at auctions, in a practice known as ”blockbusting”.
”This is becoming an increasing problem in Johannesburg,” says Marina Constas, director of law firm Biccari Bollo Mariano and an expert in sectional title law.
Patrick Ndebele’s* flat in Yeoville is owned by Chancellorville Properties, which owns scores of sectional title properties across the inner city. Ndebele says that shortly after he moved in, his landlord, Schabir Chopdat, began collecting the rent in cash, accompanied by two imposing bodyguards. ”He doesn’t pay his levies and that’s probably why he comes to collect his rent in cash,” says Ndebele. ”I know that he’s owing more than R5 000 in levies.”
Ndebele says the building had its lights and water cut in 2004, because Chancellorville owed the body corporate about R20 000 in arrears; it was unable to raise enough cash to settle the arrears. According to documents in the Mail & Guardian‘s possession the company still owes more than R6 000 in arrears.
Chancellorville Properties and Chopdat are well known to lawyers within the sectional title industry. ”We deal with nearly all the managing agents in the area and have come across Chopdat, who owns various companies and who gets his friends and family members to buy units,” says Constas.
”We are asked to sue for arrear levies. Once legal action gets aggressive, he pays or defends the action.”
Chopdat responded to requests for comment by the M&G by saying: ”I am not going to talk to you … You mustn’t get involved in things you don’t know about.”
The M&G spoke to a number of tenants and managing agents in the inner city who have had dealings with Chopdat. All say they are too afraid to go on the record, because they fear for their lives or their properties. One managing agent who has attempted legal action against Chopdat says his life has been threatened twice. ”He is causing havoc in the sectional title industry.”
Investor Ian Fife, who owns a number of sectional title properties in the inner city, says: ”Certain people have caught on to the idea that you can move into a building, buy units and bring the body corporate to its knees by not paying.” These landlords have no intention of maintaining the building once they own it, but simply see it as a means to collect rent.
”This [blockbusting] results in a deterioration of the conditions of a building and has the effect of driving the prices of units down so that these owners can acquire more units at lower prices,” explains sectional title expert Graham Paddock.
Pressage Nyoni, who works with a finance company that assists entrepreneurs buying property for development in the inner city, says that certain landlords are regulars at sectional title property auctions and intimidate other buyers who bid for property against them.
At auctions a buyer takes responsibility for paying outstanding arrears on the property. ”There is a game going on,” says Nyoni. ”These guys bid, they don’t meet the conditions [of the auction], collect rent and then dump the place.”
The root of the problem, according to Paddock, is that owners in sectional title schemes can become liable for debts incurred by fellow owners. If one unit in a block is in arrears on service payments, the Johannesburg city council will cut water and electricity to the entire building, explains Joe Ndlovu*. He is the trustee of another building in Yeoville where Chopdat’s Chancellorville owns a unit. He says Chancellorville owes more than R100 000 in arrears at this building and has not paid the body corporate anything since March 2005.
If arrears go unpaid a building is placed under court administration, says Ndlovu. To cover the debt repayments, each owner must pay a fixed sum dependent on their level of ownership. If an owner is unable to pay their share, their unit can be sold despite the fact that their personal bills are up to date.
”In the inner city most bodies corporate are just everyday people with little experience of sectional title law,” says Fife. ”It is often difficult for them to make decisions and take action. They are effectively disempowered.”
The justice system is also painfully slow. The process of prosecuting an owner who does not pay levies or municipal service fees can take up to nine months, according to Fife. During this time, a landlord continues to claim rent while still not paying his dues, further crippling the body corporate which still has to raise the legal fees required to recover unpaid levies.
But, says Paddock, there are plans to protect owners from becoming liable for the debts of others: ”The government has taken a major step to address the problem by requiring local authorities to invoice owners directly for rates. This will be implemented by local authorities as they have the capacity to do so, but it is expected that the process should be complete by mid-2008.”
* Names have been changed
