The Blyde Riverwalk Estate: owning a majority stake in the sectional title scheme
When buying property, you could be buying a full title, sectional title or leasehold. Balwin’s The Blyde Riverwalk development is a sectional title scheme where all the owners each own a section in the scheme. There is also common property, that is jointly owned by everyone. For example, the main entrance and passages between flats aren’t owned by a specific person in the scheme.
Generally, a sectional title is developed and the developer hands over the control to the owners when they take possession of the property. Sometimes, the developer decides to keep some of the sections for themselves. Sectional title and politics are quite similar – whoever has the most votes, gets to make the decisions.
What did Balwin promise?
A property developer will say and do anything to sell their properties. Balwin often includes appliances for each unit, and access to a gym, restaurant and other facilities.
In the case of The Blyde, the facilities include the manmade lagoon/beachfront, a restaurant, fitness centre and a bar. This made it an excellent opportunity for short term leases such as Booking.com and Airbnb and was pushed as a unique selling point by sales agents.
What happened between Balwin and the owners?
Earlier in 2021, Balwin wanted to make changes to the house rules and certain management features. As they still own most of the units in the sectional title scheme, they are able to outvote the owners for any decisions that are made. This includes changing the house rules, electing trustees and how the scheme is managed.
For example, the trustees (who Balwin was able to vote in with a majority vote) chose to use their own provider for Fibre and other services.
The main issue is that Balwin is able to overpower all the owners in the decisions – a classic case of a corporation against the people.
In September 2021, there was a Twitter Space with more than 5 000 listeners where owners raised their concerns over changes that Balwin wanted to introduce to The Blyde sectional title scheme. These included:
- Banning AirBnB and short term leasing – the deadline is end November 2021 for all owners to stop short term leases.
- A fee of R 250 for using the beach facilities, increased from R 100
- Balwin planned to open a hotel to compete with the short term leases that it is banning
Owners at The Blyde Riverwalk Estate…. protesting peacefully in their estate for the R250 entrance fees for guests and residents. pic.twitter.com/yuuVWBZGlc
— kelbz (@Kelbz2) September 18, 2021
The state of affairs
As of October 2021, Balwin was successful in banning all short-term leases and is intentionally persuing its own agenda. The owners have opted to get CSOS involved in mediation and conflict resolution.
The impact of Balwin’s actions – opinion
It is expected that any party that has a majority stake in an industry will use their competitive advantage to force their hand. This has historically been seen in politics (not only South Africa), corporate monopolies (IBM, Google and Microsoft) and also property – as is the case with Balwin here.
The Blyde is apparently to be the first of many similar estates that Balwin wants to roll out.
The impact on Balwin
A poll I ran on Twitter showed that people don’t trust Balwin any more. In my opinion, the situation damaged Balwin’s reputation as well as caused investors to be more cautious with buying Balwin properties.
Balwin will find it difficult to sell more units in The Blyde – unless they would catch unsuspecting buyers off guard who are not aware of the current situation.
Would you invest in a @BalwinProp estate?
— Frugal Sibusiso 🇿🇦 (@FrugalLocal) October 19, 2021
The impact owners on The Blyde
As the majority of sections still belong to Balwin, they are technically owners. However, in the context of what follows below, I define owners as people and companies other than Balwin.
As mentioned in the Twitter Spaces held in October 2021, the owners are at the mercy of Balwin. The expectations which were created when properties were sold, have been crushed.
Many owners will not see a return on their investment.
My experience in sectional title, as well as after consultation with people in the property sphere, leads me to predict the following:
- The levies increased substantially. We know that a manmade lagoon will not stay blue forever, and will need substantial maintenance. I predict another 100% levy increase within 2 years.
- Serious doubt exists if the owners will be able to sell their property for what they paid for it. I estimate a 10-25% drop in value due to levy prices and possible special levies in the short to mid term.
- Owners and Balwin will be in constant conflict over each others’ interests. I foresee this to be the status quo for the future.
Owners will also have to live with the decisions made by Balwin, such as the Fiber ISP (owned by Balwin) as well as the hotel that Balwin will be building.
Though Balwin can claim that they are ‘doing this in the interest of the sectional title scheme‘, their actions are clear that their interest is their own, not that of the residents or owners.
Balwin’s The Blyde Riverwalk estate teaches us that we need to be more vigilant when investing in property. We also need to understand the underlying factors that could affect our investments – whether a primary residence, investment property or stock.
As a classic case of a corporation against the people, I am concerned about how companies will sacrifice any person or customer to achieve their own goals. Within the era of social media and word of mouth being stronger than advertising, I believe that ethical, honest business is the only way to move your business forward.
The sustainability of investing in The Blyde for the long term is questionable and in my opinion, I foresee some serious levy increases to cater for the facilities.
Though saddened by the situation, I am thankful that I haven’t invested in The Blyde Riverwalk.
Be careful out there!