Revolving Arrears Finance

Arrears funding & collection

Many schemes find themselves at the mercy of a select few owners who refuse to pay their levies. This places enormous pressure on the successful running of the scheme. In some cases, the scheme needs to take legal action on the defaulting owners, which adds to the already strained financial situation of the scheme.

The solution: Propell Arrears Finance

Propell provides arrear levy finance solutions to Bodies Corporate. This entails:

  • Immediate access to funding based on the scheme’s current arrears
  • Instituting and funding the necessary legal action on defaulting owners
  • Further funding available on new owners with an outstanding balance of at least R3,000
  • Monthly funding of recurring charges on units already ceded to Propell
  • Shifting the credit risk associated with arrears to Propell
  • No initiation fee

Immediate access to funds previously locked-up in arrear levies allows trustees to quickly address a scheme’s pressing needs. By allowing the scheme to access future arrears as and when they occur, ensures that non-payers do not hold the scheme’s cashflow hostage and could even avoid the raising of unwanted future special levies.

Efficient collection and access to funds will permanently reverse the cycle of deterioration caused by levy defaulters. Since efficient collection is the key to the long term viability of a sectional title scheme, the Body Corporate is required to outsource levy collection of those select defaulters onto Propell. Propell will fund this process on behalf of the Body Corporate, alleviating the cash flow burden associated with legal costs.

The body corporate is only charged an advance fee when funds are paid by Propell. Defaulting owners carry the full cost associated with the collection of arrears levies. This includes interest and legal fees. The fact that the managing agent remains responsible for the levy administration means that there is no disruption in the operation of the scheme. No surety is required from any owner or trustee.

Benefits to the managing agent

  • Role remains unchanged with minimum disruption to the scheme
  • Access to funds in order to assist in the day to day running of the scheme
  • Collections headaches handed to Propell

Rates schedule:

The below is for illustrative purposes and is subject to change.

Facility type: Revolving, reviewed annually
Interest rate: 29.9% per year
Administration fees
1. Advance fee (percentage of amount being financed) 5.42%
2. Cash handling fee R 7.50 + 1.5%
3. Debit order rejection R 102.60
4. Bounced cheque R 102.60
5. Unreferenced payments R 28.50
6. Clearance figures R 285.00
7. Revised clearance figures R 171.00

All fees and costs are quoted inclusive of VAT

Document Downloads

AF: How to apply

AF: The Solution

Propell at a glance

How to Apply

Step 1: Quotation

The following documents will be required in order to prepare a formal quotation for the scheme: 

  • Levy roll of the scheme
  • Debtors list with owner balances (age analysis)
  • Participation Quota (PQ), incl. sqm size
Step 2: Due Diligence

Once the quotation has been accepted, a due diligence is performed on the scheme and the following documents will be required to finalise this process: Required documentation

  • Registered Conduct and Management Rules (plus copies of any approved amendments to the Rules not yet lodged with the Deeds Registry)
  • Minutes of the last Annual General Meeting
  • Most recent signed Audited Financial Statements
  • Most recent municipal account

 Additional documentation (if applicable)

  • Budget approved at the last Annual General Meeting
  • Trial Balance for the period since year end
  • Collections or legal report
Step 3: Contracting

Once the scheme has been approved, a loan agreement can be drafted for signature. In order to finalise the agreement, the following documents will be required: 

  • Bank statement or cancelled cheque of the account into which the funds must be paid
  • Certified copies of the identity documents of the two trustees signing the loan agreement (FICA requirement)
  • Domicilium address of the body corporate (physical address, fax, email)
  • Special resolution by members
Step 4: Take-on

Once the contracts have been signed, a review of the individual arrear balances is done to establish the amounts to be funded. The following documents will be required: 

  • Selection of arrear owner balances to be funded
  • Breakdown of the above arrear balances
  • Details of any special repayment arrangements made with defaulting owners
  • Legal report (collection and/or legal report)
Step 5: Pay-out

The loan can now be paid out provided that all suspensive conditions have been met.