The Continued Effects of Utilities on Homeowners

The Continued Effects of Utilities on Homeowners

By Matseleng Mogodi

Founder and Principal at Snooks Estates

This article was originally published by Real Estate Investor Magazine. 

What are utilities?

Utilities could mean a lot of things depending on the context. In the property ownership context, these are the services that a homeowner requires in order to live a comfortable life in their homes. These do not only refer to water, sewer, electricity, gas, and waste collection, they could also include internet, security systems, etc.

In terms of utility rates, how do they negatively contribute towards the housing affordability challenge for potential homeowners?

When someone lives in a property or even rents a property, part of their monthly costs includes utility costs, however, these rates could be an impediment towards property ownership depending on where one plans to purchase. Having been exposed to the payment should ideally prepare one mentally that property ownership goes hand in hand with property maintenance costs.

What are some of the rights property owners have in relation their utility rates?

Property owners have the right to receive services from the municipality for the utilities that the municipality has to provide for homeowners. However, it is important to note that the municipality also relies on payments received in order to provide these services adequately. The irony is that even for people that are paying if the majority of homeowners are not paying for the services they receive, the payers’ rights are also infringed as they may not receive the services they’ve paid for. Therefore, if everyone who is a recipient of municipal services paid, then I would assume that the homeowner’s rights would be satisfied.

How can property owners reduce their utility costs in order to adequately manage and sustain the properties?

It’s important for prospective homeowners to decide on the area they want to purchase in and understand what the utility rates are and what other homeownership bills would be on a monthly basis. Thereafter decide based on their individual affordability whether the bond repayment plus utilities would be manageable. If not, it’s advisable to purchase where the new homeowner can afford the utilities.

It’s therefore imperative that when one owns a home, they should budget, and know what the utilities would cost, then choose how they would save especially water and electricity as these could be humongous when not monitored closely. This is also a contribution towards the environment and saving natural resources which are being depleted as we speak.

Other costs are standard as they are based on the size of the stand, as well as the area the property is situated in. Sectional title properties will also attract levies, which are paid by all owners in that complex. Again, these are pre-determined by the managing bodies of such complexes as these monies are used to maintain the complex and pay for communal utilities and other expenses incurred for the upkeep of the complex.

Is the value of a property largely influenced by utility rates in certain areas?

It’s actually the other way round. The utility rates are influenced by the value of the property. Different areas are billed differently due to the value of those particular properties determined by the property market prices. It, therefore, gives an indication when one buys a property where property values are relatively high, that the utility rates may also be quite high, hence the importance of doing some research and asking quality questions when purchasing a home.

How much of an effect does a utility rate have on the selling and buying of a property? Are potential owners buying because rates are stable or are sellers selling due to high utility rates?

Most purchases of homes would ask what the rates are and it has not really become a huge hindrance. However, where there are levies payable, a lot of potential new homeowners have had to think twice before making the final decision. The upside though with complexes is that things such as security are catered for, and some general property maintenance is covered, which reduces a lot of stress for the property owner. When a property is not well maintained, the value declines, and the more it remains unfixed, the more the damage progresses, and the more the cost to fix, and the lower the value of the property.

When renting or buying a property outright is the new owner or tenant liable for the utility bills incurred by the previous owner or tenant?

Again, let’s separate the two when buying a house, the previous owner (seller) is obliged to pay off all the municipal debts, it is a requirement that’s entrenched in the property transfer process. This guarantees that the new owner would start on a clean slate and can probably monitor their consumption of water and electOn the other hand when renting a property, the landlord could decide that the tenant covers the municipal bill. However, this may be complicated as some tenants do not pay the municipal bill, and the bill can accumulate in the owner’s account. Therefore it’s advisable for the landlord to ensure that whatever the rent is charged, that they are comfortable that it will cover the ‘standard’ charges and the tenant can therefore pay for their consumption of water and electricity as these can be measured/ metered.