Lease crackdown will see rentals skyrocket

Nonprofit organisations to be hit by steep increases


In a bid to clean up its shambolic lease management system, the Nelson Mandela Bay municipality is going after rent defaulters and dozens of others who have been paying belowmarket rentals.
The move could see nonprofit organisations – such as the Uitenhage Mental Health Society and Lifesaving Nelson Mandela Bay – coughing up thousands of rands in monthly rentals.
The municipality has proposed that Lifesaving Nelson Mandela Bay – which currently pays R3 a month – pay R61,200 a month.
It also wants the Uitenhage Mental Health Society, which has not paid rent for years, to fork out R15,300 a month, and the Maranatha Streetworkers Trust to pay R2,700, from the R160 it pays now.
The rental for Boardwalk Properties (Pty) Ltd – which houses Barney’s Tavern, Bluewaters Café and KFC along Hobie Beach – has increased from R50,000 to R250,000 a month.
The details were contained in a report to the municipality’s budget and treasury committee, which met on Monday.
The report follows calls for an audit of the leases for municipal properties.
The city has lost millions of rands in rental revenue in the past due to its failure to properly monitor leases for municipal land and buildings.
Other organisations that could see their rentals go up include the New Love Life Trust – from R33 to R4,000 – and the Ruth Dabo Creche, from paying nothing to R2,300 a month.
The national department of public works will, however, see its rent drop from R137,815 a month to R43,960.
In the report to the committee, acting corporate services boss Mbuzeli Nogqala wrote that up until December 2018, the city had been owed R2.1m by Boardwalk Properties, R921,780 by Vodacom, R288,905 by MTN and R68,208 by Cell C.
Shimda’s Industrial Holding (Something Good) had owed the city R546,149 in outstanding rental fees and Cubana R578,879.
They had all since paid their debts.
Project manager Kuvenderen Govender, from the city’s corporate services department, told the committee that since the start of the project officials had discovered the city had about 2,700 leases on its system that cut across different categories.
He said the department was failing to meet deadlines to renew leases due to staff shortages.
The various departments were also working in silos.
“The numbers are quite scary,” Govender said.
“There are hundreds of leases that need to come to the various committees but we can’t bring them [due to staff shortages]. This is a very labour-intensive process.
“We have a skeleton staff and every month that goes by the list of expired leases that is sitting at legal services grows longer and longer.”
In his written report, Nogqala said it took the council an average of 270 days to approve a lease, while property evaluations took on average 166 days.
The legal department took an average of 209 days to vet documents while the human settlements department’s technical evaluation took 720 days.
He said the real estate function in the municipality was not being run in a manner that generated profit.
“The strategy and process plan should be amended to speed up the process of finalising leases, which would encourage more corporate sector companies to consider leasing from the municipality.”
Grilled by councillors on the proposed rentals for nonprofit organisations, Govender said the rates were applicable at the discretion of the council.
He said the plan was to review the land disposal policy to allow for a discount or rebate for NPOs.
“At this stage, we have to apply what is in regulation 34 of the asset transfer regulations of the MFMA [Municipal Finance Management Act, which says] we have to consider market value.
“As officials, our hands are tied when it comes to this. “It’s at council’s discretion. “We can’t give a discount although we do understand the plight of these organisations.
“We understand that lifeguards provide a vital service, but we are powerless at the moment in terms of discounting, hence the leases have not been signed,” Govender said.
The municipality relies on the lifeguard volunteers to man its beaches, particularly over the festive season, because it does not employ enough permanent lifeguards.
Lifesaving Nelson Mandela Bay chair Earl Ingram said most of the clubs would be forced to shut down if the municipality pushed ahead with the demand for R61,200 in rental a month.
Ingram said the body had started negotiations with the city three years ago over the proposed lease fees.
“We haven’t heard from them for a while, so we’re still in the dark with what’s going on,” he said.
“All our clubs are voluntary clubs. We provide voluntary lifeguards for the municipality.
“We rely solely on membership fees and, here and there, sponsors to run the clubs.”
Of the seven lifesaving clubs that fall under umbrella body Lifesaving Nelson Mandela Bay, three are development clubs.
“The development clubs can’t afford to pay rent because their members can’t afford to pay fees,” Ingram said.
“If they push ahead with this, most of the clubs will have to close their doors.”
Uitenhage Mental Health Society CEO Dr Peter Else was shocked when told of the proposed monthly rental.
“It would certainly put a serious damper on the running of the business.
“We’ve only this month received outstanding subsidies from the government and we also only enter the new financial year next month – we don’t know what we will get.”
Else said the facility was under enormous financial strain, to the point that it had been forced to sell one of its offices to make extra money.
The facility houses 17 mentally disabled people.
The Society for the Prevention of Cruelty to Animals (SPCA), which had previously not been charged a rental fee, was asked to pay R4,700 a month from January.
However, SPCA district chair Deidre Swift said the city had eventually agreed to subsidise the rental after the organisation said it would be forced to charge the municipality more for the animal pound service it operated on its behalf.
ANC councillor Rory Riordan warned at the meeting that the organisations would not be able to pay the rent.
“We all agree that this is a necessary process we are going through as we have properties in the hands of outside organisations. We have to ensure that the rent is appropriate.
“But I see that we are suggesting that Lifesaving Nelson Mandela Bay should pay us R61,200 in rental.
“With respect, we can send them the bill but I don’t think they can send us the money
“We need to be careful about how we go about this when it comes to [nongovernment organisations] that do public service work.”
DA councillor Tracy Weise said while the party welcomed the report, it had asked for a full list of all the properties leased from the municipality.
“This report is helpful but not exactly what we had asked for,” she said.
“We need to ascertain how much work needs to be done here.”
DA councillor Andy Jordan said the proposed rental amounts for some nonprofits were unrealistic.
“You go from nothing to R4,000, you go from R3 to R60,000, you go from R33 to R4,000.
“This needs to be relooked at. These people would have to close their doors because of these amounts,” Jordan said...

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