Solution for the current credit crisis
by Coert Coetzee

True to the nature of Treoc, we’re always seeking and finding solutions to problems. One problem investors are currently facing is that, as a result of the credit crisis, the banks can no longer give us the bonds that we want. After doing thorough research, having long conversations and getting legal opinions, we’re ready to announce the solution for the property industry’s struggle with the banks. The solution lies in a very old law, which was last used on a large scale in 1998, when the interest rate was 25.5%. I’m referring to the Alienation of Land Act no. 68 of 1981, which we’ll call ALA for short.

ALA regulates the purchasing of property on an instalment agreement, protecting the rights of both buyer and seller. Before we look at the main features of this law and see how it’s going to solve our problem, we should first have another look at exactly what our current problem is.

In the six years since we started with the Treoc Way, our members have made the most of their resources and have built up large portfolios. Some of our members have since encountered problems, like losing their jobs or their businesses, or even just losing big contracts at their companies. Whatever the case, some people are having financial difficulties at the moment and cannot service their bonds. The only solution for some is to decrease the size of their portfolios, in the same way as a cattle farmer has to decrease the size of his herd when there’s a serious drought. It’s easier said than done, though, because the market is flooded with properties and there aren’t a lot of buyers. Buyers are scarce because the banks are making it difficult for them to buy.

We all know that we currently have the best buyers’ market in many years, but we can’t take advantage of it because the banks don’t want to grant bonds. Even at Treoc there are far fewer people qualifying for 100% bonds than there were .........................

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