By Paul Henry
The success or failure of sectional title schemes today is dependent to a large extent on the body corporate trustees and their managing agents. However, this simple fact is often forgotten by the developers who appoint the managing agents for the first year and by the body corporate members or owners who have to elect the trustees who will run the development going forward.
In the circumstances, the performance of your managing agent is crucial. The managing agent’s portfolio manager responsible for a particular body corporate should be fully au fait with the requirements of the Act and should provide guidance to trustees in all their decision-making. Trustee meetings should be attended and managed by a managing agent who is capable of guiding the trustees in practicing good corporate governance and correct procedure and not by a clerk who has been sent there to take the minutes.
There have been many instances where the elected trustees and / or their managing agents were disinterested or ineffective. There have also been certain rare cases where the managing agents have embezzled thousands of rands, which were entrusted to them. Managing agents lack of presence and input, almost invariably led to developments deteriorating as a whole and losing their value and this applied almost as much to smart upper bracket projects as to those in the more affordable groups.
It has to be realised, that before a bank will grant a mortgage bond for a sectional title scheme, it will insist on seeing the development’s accounting records. If these then reveal any inefficiencies or negative trends, the loan will not be forthcoming. This, in turn, means that sales in the scheme will become difficult or even impossible and its deterioration will be inevitable.
The first year in the life of a development is probably the most crucial time of all. It is in this first year that the disciplines have to be established and body corporate members and their tenants must be made aware of their responsibilities to each other and to the development as a whole. Furthermore, it is the trustees’ duty to establish and enforce the rules through which the development is run. This can often involve embarking on a comprehensive educational programme for owners and their tenants, especially in the more affordable developments where it can happen that many of the residents will never before have lived in close proximity with each other.
In that first year, too the board of trustees and their managing agent will see to it that the developer shoulders all of his responsibilities as regards snagging repairs. They will at some stage, usually within 12 weeks of the completion, insist on a formal handover of the building, at which all snags will be noted and listed and the developer will have to commit himself to a fixed date by when they will be repaired.
Repeating what the Rawson Property Group Chairman, Bill Rawson, has said on several occasions, we stress that it is essential for all body corporate members to attend the development’s annual general meetings and any special meetings called. At the AGMs as many as possible of the trustees elected to represent the members should actually live on the premises. When too many absent trustees are on the committee, problems tend to go unnoticed and are not attended to.
The trustees must also keep a close check on the managing agent. All expenditure must be authorised by the trustees and regular discussions regarding maintenance and repairs need to take place. Great care should also be taken in the original selection of the managing agent.
It has been estimated that almost 25% of South Africa’s sectional title projects are in financial difficulty. It is also true, however, that this has in almost all cases been due to ignorance and poor management, which have resulted in owners’ debt levels rising and all the usual problems that follow on from this situation.
Paul Henry is the Managing Director of Rawson Developers. For more information please www.rawson.co.za.
This article is published under the Creative Commons Attribution license.
13 Comments.
Hi,
Can a member of the Board of Trustees be a director of the managing agency?
We have a Managing agent and I have been appointed as a Trustee. When attending the Trustee meetings, can I insist on seeing the Debtors age analysis?
Hi Karen,
Thank you for your comment. We would love to help but unfortunately do not give free advice. Here’s how we can help:
– We offer a Free Basics of Sectional Title 1-week short course. You’ll be able to ask your course instructor any related questions. Find out more here.
– We offer consulting via telephone for R490 for 10 minutes. Please call us on +27 21 686 3950.
– We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes. Find out more here.
Kind regards
Paddocks
The managing agent at our estate billed us an exorbitant amount for water in July stating that Joburg Water had reassessed its bill to the estate for a period of 7 months; starting last year September to this year March. Due to past discrepancies and dishonest conduct by them, my husband and I took it upon ourselves to contact the Department of Water. We discovered that there was no reassessment of the Estates water bill, the managing agent had blatantly lied to get money from the homeowners. They refuse to be accountable for their actions, even with the written communication we provided them from Joburg Water. What do we do?
Dear Tshidi,
Thank you for your comment. We are more than happy to help, however we do not give free opinions / advice. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you. Alternatively, join us on http://www.paddocks-club.co.za.
Kind regards,
Paddocks
Hi
Quote :”At the AGMs as many as possible of the trustees elected to represent the members should actually live on the premises. When too many absent trustees are on the committee, problems tend to go unnoticed and are not attended to.”
I am chairman of a very large B/C and I totally disagree with the above. I have full knowledge what happens in the complex via the one in-house trustee and we attend to business daily. In fact the opposite is true. It is far better for the chairman NOT to live in the complex. The reasons are simple if you think about it. Are you going to listen to someone you see everyday, talk to everyday, braai with him if he is your neighbour, socialize with him, become too friendly and expect favours in return? No. Discipline and good governance is far easier to manage if the chairman is not living on the premises. That is not to say he must neglect his duty of site visits from time to time. Furthermore I cant be classified as a “Absent trustee” if I dont live on the complex?
Our former trustees for 9 years had never audited our books and the new trustees are continuing with the managing of the building ,they don’t want to bring their minutes also so we are frustrated as Bodycorp and we don’t have enough for attorneys
Can a Managing Agency appoint a tenant as a trustee,when there are willing owners available to do the job?
The body corporate of my complex held a meeting and passed a resolution to terminate the mandate of our current agent and appoint another.
The current agent regused to leave stating they were not sent a notice of the body corporate special general meeting. Now the newly appointed agent trying to make peace and advised we call another meeting. The new agent has now on our behalf sent out d notice to all including the agent to be terminated. They used their letterhead and noted they are acting as managing agent to us, even though the old agent refuse to step down. Anything wrong at any point in the events mentioned? Kindly advise. Thanks
Hi Eileen,
Thank you for your comment. We would love to help, however we do not give free advice. Here’s how we can help:
– We offer consulting via telephone for R490 for 10 minutes. Please call us on 021 686 3950.
– We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes.
Kind regards,
Paddocks
Can 3 members of one family be trustees of a sectional title of 12 units?
I need assistance with a bodycorp which is bullying us and I can not take it anymore. what can I do about this.
Can a tenant become a trustee