Crisis in South African Strata

Over the last few months a strata crisis has been developing in South Africa.

One of the largest South African strata management companies, Constantia Sectional Title Management (CSTM), who manages 450 buildings and 20,000 lots is under investigation by the Estate Agency Affairs Board for the alleged “misuse of trust funds” and has now been placed into liquidation. 

But that investigation has revealed that in certain instances CSTM failed to pay over its client’s water and electricity obligations to the relevant municipalities. The failure to pay over the money to municipalities has meant that sellers of CSTM managed sectional title units are struggling to obtain a clearance certificate which is vital for a sale to happen.

Owners of affected properties will not be able to get clear certificates which will prevent settlements and buyers will have trouble satisfying their mortgagees requirements for release of funds to buy.

It’s a serious problem that’s not likely to be resolved quickly.

Property consultant at Biccari Bollo Mariano (BBM) attorneys, Marionette Bubb, frankly stated the fate of CSTM’s body corporates as follows “without the banks the buyers are not going to be given loans, if the sellers manage to get a cash buy that’s fine but then you [the buyer] will have to convince the trustees to give out a clearance certificate in order to finalise the property transfer, that will no doubt cause a delay so in the interim the new home owner will effectively be paying occupational rent until the transfer is finalised which could take months”.

You can read more about it here.

Francesco …