Dispute over Durban's 'worst' building back in court

The 'worst' building in Durban case goes back to court. (Supplied)
The 'worst' building in Durban case goes back to court. (Supplied)

Durban - It takes its name from the go-to restaurant once popular with locals and holiday-makers, but the Tong Lok building in Durban's Mahatma Gandhi Road (formerly Point Road) is less than a shadow of its former self.

Once overrun with glue-sniffing street children, it is boarded up and from the outside appears to be uninhabitable and abandoned.

While it bears the dubious honour of being the "worst" building in Durban, it is the subject of an ongoing court battle which raises legal issues important to people who own property in decaying sectional title buildings.

In a matter to be argued in the KwaZulu-Natal High Court in Durban early in August, Kevin Shames, a trustee of BC Specialised Opportunities Fund Trust, wants an administrator appointed to step into the non-functioning body corporate's shoes.

This is in a final attempt to put it on a sound financial footing, failing which the owners could lose it all.

READ: SCA rules that Durban's 'monstrosity' 9-storey building will remain

Rates debt

If the application succeeds, it will be the second time the building will be placed under administration.

The money owed to the trust - used to offset a mounting municipal rates debt - came about through a loan taken by Andre Grundler, the previous administrator appointed by the court at the eThekwini municipality's behest.

The only full-time resident at that time was a nurse from a local hospital.

When his three-year-tenure came to an end, Grundler said he had appointed a managing agent, sourced owners, put in place budgets and taken legal steps to recover unpaid and special levies.

But real progress was impossible because he had too little time and there was too little money.

"Various attempts at a constructive solution, including obtaining agreement from owners for relinquishing units to the body corporate in lieu of levy claims and voluntary sales to interested purchasers, failed," he said at the time.

The initial loan from the trust (formerly the Nexus Multi-strategy Fund), was for about R300 000, but the amount owed far exceeds that now.

Default judgment obtained by the trust against the body corporate in 2014 was for about R522 000, plus interest.

Remedial action

Shames, in his affidavit filed with the court, said the loan agreement stipulated that the debt be repaid within three years. The anniversary came and went and nothing was paid back.

"We issued summons, obtained default judgment but no payment was made," he said.

In the meantime, the building continued to deteriorate. Several city departments, including the health department, instructed the body corporate to take remedial action, but nothing was done.

Shames said there were serious health issues. There was no water to the building, refuse was not being removed, and the waste water drainage system was not working.

"The building poses a major health hazard for any occupants and neighbouring buildings," he said.

"Levies are not being collected. And the body corporate cannot pay its debts and its running expenses. The situation is alarming. Not only is it being mismanaged, it is not being managed at all."

Shames proposed the appointment of another administrator who could get finance through investors and again attempt to collect debt from owners.

However, one of the owners has applied to the court to intervene in the application.

'Fraudulent' judgment

Sulaiman Ryland, who owns DC Commercial Venture CC, the registered owner of two units and several parking bays in the building, says the proposed administration could plunge the owners into more debt.

He admitted the building had "deteriorated substantially as a result of mismanagement". He said Grundler had not presented to the court any records of assets and liabilities, ledger and bank accounts.

He claimed the judgment obtained was "fraudulent and stands to be rescinded" and alleged that the loan was never used for its intended purpose - to pay off a rates debt.

Ryland alluded to a "scheme to swindle the owners out of their units".

"Any further finance is designed to ultimately prejudice the unit owners, who run the risk of losing their properties to a syndicate vested with hidden agendas," he alleged.

Ryland said the powers of any administrator should be curtailed to stop any "drastic inroads into the property rights of owners, which is tantamount to an arbitrary deprivation of property".

Shames replied that Ryland's allegations were vague, unsubstantiated, and defamatory.

He said Ryland and the other owners had for four years done nothing about the situation. He provided documentary proof that the loan was used to pay the municipal debt and said Ryland "boldly stated" that the judgment was obtained fraudulently, but did not give any basis for this.

Shames said if rehabilitation was not possible, as a last resort, the administrator could apply to the court for the "deemed destruction" of the body corporate.

This meant the owners would lose their individual right to their units and the entire building would be put on auction.

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