Success followed a decade of legal wrangling to clear a Durban building that had turned into a no-go zone.
Blessing Mbhele, a buff bodyguard turned building manager, has an angelic smile that changes in an instant when he means business. He is one of a team responsible for an inner-city transformation in downtown Durban that turned a blight on the landscape to a poster boy for rehabilitation.
Ana Capri is a block of 56 apartments, some with harbour views, overlooking the green lung of Albert Park. In 2004 Trafalgar Properties founder Neville Schaefer teamed up with now-deceased property guru and inner-city enthusiast Ian Fife.
Schaefer and Fife became involved in Ana Capri out of their interest in inner-city property. But soon afterwards, the building’s body corporate was deep in the red because of levy arrears. First-time owners unused to paying levies missed their payments and debt piled high.
Trafalgar, SA’s largest residential property management company, which cares for 100,000 flats in 1,500 buildings countrywide, offered the body corporate a levy solutions product — a loan to help run the building and conduct essential maintenance.
Dysfunctional bodies corporate contribute greatly to inner-city decay and one route to rehabilitation requires placing them under administration and working with owners to restore normality. The administrators offer financial management training and agreements with municipalities and banks to recover arrears.
Ana Capri had degenerated into a squalid pit and the building was hijacked by a couple who filled the block with illegal tenants and collected the rent.
Initially, the owners were mute while their bond and levy debt mounted. Then they started a decade of legal wrangling to clear the building.
After Fife died in 2010, the task of restoring Ana Capri to financial health fell on the shoulders of Schaefer’s son Michael and building rehabilitation expert Andre Grundler.
At the height of the crisis, Ana Capri’s body corporate owed R9m to Trafalgar, half of which was fees to lawyers tasked with recovering levy arrears. The balance was for electricity and water arrears.
Michael Schaefer says the legal system worked too slowly. “You get a judgment against an owner in arrears. You expect lawyers to serve those judgments swiftly and for the process to be executed quickly, but it doesn’t work like that. Lawyers bill by the hour,” he says.
The city turned off the water and electricity supply to the building. “There was raw sewage in the corridors. The lift shaft was filled with garbage up to the 8th floor. It was revolting,” Michael Schaefer says.
The sheriff of the court wouldn’t serve eviction notices because he feared for his safety. Trafalgar offered to pay the illegal occupants R10,000 per flat to vacate. Some accepted the offer, but this stopped after a Congolese woman was shot and killed by someone connected to Ana Capri.
In November 2017 the Durban high court ruled that Trafalgar had legal right to control the building. The company had spent R1m on legal fees and had R9m debt.
Trafalgar bought 15 flats owned by an investor, and when the body corporate auctioned the remaining flats, Trafalgar took them in lieu of body corporate debt.
The company spent R12m more renovating the building but only started work after contracting a security company that controlled the taxi rank next door to Ana Capri.
Mbhele and his team protected the workmen around the clock for six months while, under the supervision of retired engineer Charles van Herzeele, they gutted the building and fitted a new roof and lift.
The job took eight months to complete and now the building is 60% let to tenants paying R3,950- R4,250 a month for flats of 42m²-45m².
The street-level flats were converted to a shop, laundromat and hairdressing salon. The building now has biometric access and CCTV cameras.
Mbhele was hired as the building manager. He says most of the new tenants are teachers and police officers, and he seldom has to get heavy with them.
“We talk nicely when they arrive, nicely but straight. You have to behave with discipline in this building,” he says.
Schaefer says Trafalgar has commissioned three specialist attorneys to deal with levy arrears. There are no delays and no mounting debt.
Of the 100,000 units Trafalgar manages countrywide, 3,000 use the company’s levy solutions product; 20% of them are about R15m in arrears.
Schaefer says bodies corporate should all be demanding zero debt. “You have to buy into a scheme you can afford. There is no room for nonpayers. If people don’t pay it means the compliant owners have to subsidise them and they can only do that for so long,” he says.
Hoosen Moolla, head of Durban’s inner-city regeneration programme, says the municipality supported Trafalgar in court. “It is a success story that we hope can help turn around other buildings in a similar situation … we hope it can become a catalyst for change,” he says.
Sectional title expert Andre Grundler, who has worked with about 100 dysfunctional bodies corporate in Durban in the past decade, says buildings for which levies are charged are inappropriate for housing the poor.
Grundler has tacked high-profile cases in which rent-controlled social housing was sold to low-income earners in subsidised schemes — the results have been disastrous. Most residents can’t afford the levies required to run the blocks, and Grundler has witnessed elderly residents carried down 10 flights of stairs because the lifts have been broken for years.
“Sectional title ownership is not the answer for low-income housing, especially in high-rise blocks where maintenance costs are high,” Grundler says.
“There isn’t a mechanism to collect levies quickly, so debt spirals out of control and buildings quickly turn into slums. We have a rights culture in SA that is not matched by concomitant responsibility. In a sectional title scheme the good guys who pay subsidise the bad guys.”
Property data company Lightstone says there are 66,000 sectional title schemes in SA, with 753,000 units worth R767bn. Lightstone’s Cindy Beets says it is difficult to estimate how many of these buildings are in distress. The National Association of Managing Agents doesn’t know either.
Lightstone says 6,634 sale in execution notices have been issued in SA in the past four years, but only 3,862 of those distressed properties went on auction so banks could recover some of the debt.