ARTICLE
26 June 2020

Sprouting Of Property Stokvels In South Africa

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SchoemanLaw Inc.

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SchoemanLaw Inc Attorneys, Conveyancers and Notaries Public, based in Cape Town, is a boutique law firm offering its clients access to high quality online legal documents and agreements, together with a wide range of legal services. The firm has an innovative and entrepreneurial mind-set that distinguishes it from other law firms. We apply our first-hand understanding of the challenges facing entrepreneurs (regardless of their business size) to develop proven, practical solutions incorporating legal compliance, risk aversion and business sense. We achieve this by offering clients tailored, yet holistic support comprising of legal gap analysis, the construction of tailored legal solutions and the practical implementation thereof through training and automation.
In this digital age, more and more people are "getting connected" resulting in multiple platforms for audiences to share ideas and collaborate, especially in the case of raising funds.
South Africa Real Estate and Construction

In this digital age, more and more people are "getting connected" resulting in multiple platforms for audiences to share ideas and collaborate, especially in the case of raising funds. Many Entrepreneurs have great ideas for businesses and want to venture into the property world but in most cases, they lack the required capital. A possible solution to this appears to be the use of Property Stokvels as a means to raise capital and finance businesses.

A Property Stokvel can be defined as a type of credit union in which a group of people enter into an agreement to contribute a fixed amount of money to a common pool either weekly, fortnightly or monthly.

Uses of Property Stokvels

  • The most common use of Property Stokvel is buying and leasing. This is where members contribute money to buy a property, rent out, maintain and manage it with each member benefitting from the rental income.
  • Another is Home purchasing. This is where members contribute money to secure homes for every member of the Property Stokvel.
  • Investing in vacant land. This is where the members buy a vacant plot, pay it off and then use the stokvel as a means to fund prospective build on the plot.
  • Another use which is popular among members who do not want to deal with the management of the property, is purchasing shares in a property investment portfolio. This is where the Property Stokvel creates annuity income for members.

Regulation of Property Stokvels in South Africa

Property Stokvels are not part of the formal business sector and, as it stands are not regulated in South Africa. There, therefore, appears to be no legal protection offered to a Property Stokvel and its members. Irrespective of this, Property Stokvels appear to be a current and growing trend in South Africa.

Conclusion

It is essential that a prospective member does the necessary due diligence before joining as currently, there appears to be no legislative or regulatory framework which governs the establishment and conduct of Property Stokvels.

It is furthermore, recommended that members formulate their own constitutions that will deal with the rules, regulations, membership information, duties & responsibilities of each member, goals of the Property Stokvel and what should happen when a member leaves or is unable to keep up with their financial obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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