Jason Lee, who heads up Rawson Properties new Commercial Franchise Division (which in its first six months has sold 16 franchises), has raised again the thorny question of why banks limit their commercial bonds to relatively short time periods - usually 10 or 12 years at the most and sometimes for even shorter periods.
'The banks,' said Lee, 'have said openly that they are now looking to expand their markets and to become more profitable. If they extended their commercial bonds to 15 to 20 years (as they are quite prepared to do in the residential property sector) they would make more money, especially as commercial bonds are issued at higher interest rates than those for residential property, they would attract more investors into this asset class and they would help struggling landlords come through the current difficult times'
Lee said that, as a regular peruser of the Sheriff Auctions list, he can testify that commercial property repossessions have been relatively limited despite the difficult economic conditions - and, he added, there is little or no truth in the often-repeated statement that commercial property tends to need more maintenance than residential property.
'These days in almost every case commercial property has a large component of maintenance-free elements such as face brick, resin bonded floors and aluminium cladding. Furthermore, the bank issuing the bond is entitled to reserve the right to inspect the mortgaged property regularly to ensure that it is being properly maintained and almost all do this'
Lee said that in talks with South Africas major banks he has, as yet, heard no valid arguments in favour of short commercial bond periods. What is more, he said, all the banks offered different reasons for the shorter periods, indicating that there is no consensus on this matter. The stances taken by them, he said, are based on traditional attitudes rather than on any logical reasons.
For further information contact Jason Lee on 021 658 7100 or email jason@rawsoncommercial.com.
