Improving an estate's ability to function
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Levy income is the lifeblood of any estate, and ineffective management and collection of funds can have a crippling effect on the sustainability and success of an estate. The main object of an estate is to carry on the promotion, advancement and protection of the owners' interests in the estate and to maintain and control the common areas.
Most estates have at least one or two high-maintenance elements within their fence line, such as golf courses, privately maintained roads, extensive gardens, swimming pools, leisure centres - and the actual fence line, for that matter. Without a consistent and reliable inflow of funds, an estate will not be able to fulfil its functions and will come to a crippling halt.
The responsibility of managing the funds of an estate rests firmly in the hands of the executive committee and they are expected to take all reasonable steps to ensure the effective management and protection thereof. As most executive committee members are laypersons with limited financial and legal knowledge, it is understandable why it is regarded as such a daunting task to serve on an executive committee. It is for this reason that many estates struggle to find enough willing and capable nominees to serve on the executive committee, and it is even more reason why many executive committees elect to outsource this vital function to a professional and knowledgeable property management company.
A person or company, other than an attorney, who for reward collects debts owed to another on the latter's behalf is regarded as a debt collector in terms of the Debt Collectors Act 114 of 1998, and therefore property management companies, like Pam Golding Property Management Services (Pty) Ltd, are required to be registered with the Council for Debt Collectors and to be in possession of a certificate of registration before they may act as such.
As registered debt collectors, property management companies are entitled to collect outstanding levies on behalf of estates, and this collection process usually involves the following:
- Once a property management company has generated and issued levy statements to all owners within the estate, they need to actively manage the timeous payment thereof. This active management must include telephonic and email follow-ups with owners who fail to settle their account before the required date of payment.
- Should an owner fail to settle their account before the required date of payment, usually the first day of every month, a friendly reminder must be issued. We often find that, given the busy lives that most people lead, one of the first things to be forgotten is the payment of levy accounts. It is for this reason we encourage the use of debit orders to minimise the number of these innocent oversights.
- Unfortunately not all non-payments are a result of innocent oversights, but are rather a reflection of the tough economic times currently facing our country. When times are tough, owners usually regard their levies as a soft target and as such they find it easier to justify skipping a month or two on levy payments than for instance skipping payments on their medical aid premiums or bond repayments. It is therefore important for estates to take a zero tolerance approach toward the non-payment of levies to ensure that owners understand the importance of levies and the consequences of non-payment thereof.
- As soon as it becomes clear that a friendly reminder has failed to achieve the desired result, the property management company must immediately issue a letter of demand. Once the time limit set in the letter of demand for payment has lapsed, it is important that the outstanding amount is handed over to attorneys for the issuing of a summons. Although this may seem harsh, it is unfortunately the only way to avoid an unpaid levy account from spiralling out of control.
- Once an outstanding levy account has been handed over to attorneys, the legal collection process could take months, sometimes years, to yield results, given the heavy backlog of the country's court system, and there is a potential minefield of complications and legal defences that can prolong the process even further, while the estate and all its owners suffer as a result.
Estates therefore need to ensure that all owners understand the importance of their levies and respect the need to pay them on time. This is why, when it comes to the management and control of levies, prevention is always better than cure, and an effective and swift-acting property management company can be a crucial strategic partner.
Auren Freitas dos Santos, Legal & Compliance Officer
Pam Golding Property Management Services
Author: Estate Living