June 24, 2005
By Ndaba Dlamini
SEVEN neglected buildings in the inner city will be expropriated by the City of Johannesburg through the Better Buildings Programme, a Johannesburg Property Company initiative committed to fixing up slums.
Geoffrey Mendelowitz, Better Buildings' programme manager, says the City is already in the process of buying the buildings, which have been included and awarded on the Better Buildings Programme, from the owners.
"The buildings have one thing in common - they are sectional title buildings. This means we have to expropriate all the sections and the whole of the common property of such sectional title. Sometimes the owners of the sectional titles may object to the expropriation and this may drag the process."
The seven buildings are Eastgate, San Michell, Jean-Law Court, Vannin Court, Beaconsfield, San Jose and Regina Heights. Better Buildings was launched in 2003 to attract private sector investment to refurbish buildings in the inner city that were poorly managed and not maintained properly.
Buildings for the programme are identified and prioritised by the Johannesburg Property Company when the money owed in arrears to the City is more than the value of the building and legal action to recover the debt has not been successful.
Mendelowitz says since the expropriation of the buildings amounts to administrative action, all unit holders of each affected building, stakeholders and the body corporate have to be notified of the council's intention to expropriate the property.
"If there are any objections, the affected party or parties have to put their objections in writing and send them to the City. The City will then reconsider the resolution to expropriate the property," he says.
To expropriate the buildings, the City has to buy the buildings at market value and compensate the unit holders on the market value of such units. However, payment can be mitigated by set off of debt owed.
All the seven properties on the list are sectional title and have body corporates. As is the nature of properties on the Better Buildings Programme, all of these body corporates suffer from the same problem, according to Mendelowitz.
"The amount of municipal arrears owed by the properties exceeds the estimated market value of the building if the building were capable of being sold as a freehold property. Eastgate, for example, owes the City about R3,4-million in arrears and [its] market value has been pegged at R900 000."
Also, the body corporates or committees elected to manage and collect levies from tenants are essentially non-existent, with no formal meetings of trustees being held, no managing agents in place and generally no books and records of accounts.
In most cases, the owners of the buildings no longer have control of the flats. "Either these flats have been hijacked or most of the owners are nowhere to be seen," Mendelowitz says.
He says the City obtained judgments against each of the body corporates and also proceeded in terms of Section 47 of the Sectional Titles Act to have the individual unit holders declared jointly liable for the municipal debt.
"Although the Council has received monies in this regard, the majority of the municipal debt remains outstanding."
The City also weighed the option of acquiring each and every unit in the body corporate of each building. However, Mendelowitz says, this would require multiple sales in execution, liquidation applications or sale agreements in respect of each building, a process that would be all but impossible because of the difficulties in locating the unit holders, and certain holders' resistance to the process, and other parties acquiring the units in preference to the council.
After expropriation, the City has to find new owners for the buildings. The Better Buildings Programme has a list of potential developers, investors and managers registered with it.
"The new owner has to sign an obligation agreement which spells out exactly how he is going to fix the building," Mendelowitz says.
"He has to provide details of refurbishment and proof that he has the means to refurbish. In terms of the obligation, the City writes off the debt owed by the building."
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