In my discussions with clients and students alike, I have found that most people are under the impression that the appointment of a managing agent has to be authorised by the body corporate members. Even managing agents appear to be misinformed when it comes to the authority needed to appoint them. Let’s take a closer look at the authority needed to legally enter into such a contract.
The prescribed management rules oblige bodies corporate to appoint a managing agent if the members so decide, but this is not the only manner in which such appointment may be authorised. The rules also state that the body corporate must appoint a managing agent if a registered mortgagee of 25% in number of the primary sections so decide and that it may also make such an appointment if the trustees so resolve.
Therefore, the decision to appoint a managing agent can be taken by:
- the trustees; or
- the members; or
- a registered mortgagee of 25% (in number) of the primary sections.
Entering into the contract:
Regardless of the authorising party’s identity (whether it was the trustees, members or a mortgagee who authorised it), it is important to remember that the contract between the managing agent and body corporate can only be valid if it is signed on the authority of a trustee resolution by two trustees. So if the members passed an ordinary resolution authorising the appointment, the trustees must still pass a trustee resolution stating that the trustees have resolved to enter into the particular agreement in accordance with the ordinary resolution passed on the specified date and that they further authorise the two trustees (who should be clearly identified) to enter into the contract with the particular managing agency.
Paying the managing agent:
While the appointment of a managing agent does not necessarily have to be authorised by the body corporate’s members, it is important to note that the trustees may only pay the appointed managing agent if such payment is in accordance with the scheme’s budget as approved by the members in a general meeting. So, if the members did not approve a budget which provides for the payment of a managing agent, the agent cannot be paid (even if their appointment was duly authorised by the trustees). It is therefore important to remember to not only obtain the authorisation to appoint a managing agent, but also to pay that managing agent.
Should you have any questions regarding the appointment or payment of a managing agent, don’t hesitate to contact us at firstname.lastname@example.org for a no-obligation quotation for legal advice in this regard.
Article reference: Paddocks Press: Volume 15, Issue 5.
Specialist Community Scheme Attorney (BA (Law) LLB), Ané de Klerk, combines her work experience as a Portfolio Manager with knowledge of conveyancing and community scheme law.
This article is published under the Creative Commons Attribution license.