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Property Industry News

Municipal performance hurting property and finance sectors

20 Jun 2018

Delays in municipal building clearance and rates clearance certificates are impacting more than just the building industry.

Bridging finance and other lenders are experiencing added complications and delays as developers and individuals continue to be frustrated by red tape and ineffective municipal systems.

"We have heard from a number of clients that there are ongoing delays with building and rates clearance certificates," says Gary Palmer, CEO of Paragon Lending Solutions."

"These delays are slowing down the sales and transfers of properties and impacting loan settlement times. The knock-on effect is that the whole deal cycle is moving slower than it should, which is bad for the economy in general and the property development market in particular. It's time for decisive action to be taken."

Complexity and communication seem to be the main contributing factors. Palmer explains that plans need to be sent through multiple divisions within municipalities with poor inter-departmental communication. For commercial property developers, delays in plan approvals mean delays in work, and a delay in sales.

For developers these delays are further exacerbated when a sectional title registration is opened and units need to be valued individually, rather than collectively (as an erf), as was the case some years ago.

The problem also extends to the private homeowner looking to sell his or her property.

"A Paragon bridging finance associate told us that something as simple as adding an extra garage or a patio wall can put a spanner in the works. Rates certificates will not be issued unless the improvement plans are passed through multiple departments such as the subdivision department, the building division department and the town planning department. Something that used to take a week is now taking four to five weeks," says Palmer.

Conveyancers are also seeing the knock-on effects of the delays.

"Beyond the building delays, obtaining rates clearance certificates is becoming a real challenge for conveyancers. Some clients are being told they have two water metres, some are being asked to submit their own readings, and faulty electricity meterage can see rates disputes locked up in an administrative limbo. All of this leads to increased legal fees and missed opportunities when it comes to bridging finance for bond registration."

Palmer believes it is time the property and financial cluster take a joint stand to lobby for intervention.

"Whatever the reasons for these delays, whether it is a lack of appropriate resources or internal system inefficiencies, municipal non-delivery is stalling deals. In a time when our economy desperately needs money to be flowing, delayed property transactions for both private and commercial property is negatively impacting a number of sectors. Hunting for foreign direct investors is an important focus for government, but freeing up the wheels of the domestic economy could have more impact in the longer-term," Palmer concludes.

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