Sectional title schemes terminate their managing agent contracts from time to time, for various reasons: more competitive pricing for services by another agent, dissatisfaction with the service delivery or a decision to self-manage the scheme. The body corporate must give notice to the managing agent. There are actually two notification requirements and this is where confusion can arise.
Prescribed management rule (PMR) 46 says that the contract with the managing agent initially runs for one year and shall then automatically be renewed from year to year unless the body corporate notifies the managing agent to the contrary. As with any contract, the managing agent contract should have a termination notice period as one of its terms. If it does not, reasonable notice of termination must be given, and that would vary depending on the circumstances.
It’s easiest to explain how these two notice requirements work together by using an example.
Let’s say the managing agent was appointed on 1 June in terms of a written contract that has a two month notice period. When it comes time for the body corporate to change agents, it must give two months’ notice. But what about the automatic year by year renewal provision of PMR 46(1)(a)?
There are three possibilities:
1. The two month notice is given on 1 April, two months before the contract’s anniversary date. In this case, both notice requirements coincide and the contract terminates on 31 May.
2. The two month notice is given on 1 January, five months before the contract’s anniversary date. In this case the contract will not terminate on 28 February as one might expect from the contractual two month notice period. The contract will still terminate on 31 May because of the legislated requirement that the contract runs from year to year.
3. The two month notice is given on 1 May, one month before the contract’s anniversary date. The contract would then terminate on 30 June, one month into the new “year by year” period and not at the end because the body corporate notified the managing agent of termination before the anniversary date. The contractual two month notice period runs its course and the contract terminates at the end.
Trustees – and the owners because, acting as the body corporate, they could instruct the trustees to terminate the managing agent contract – need to understand when to give notice to avoid an excessive, unintended notice period.
Article reference: Paddocks Press: Volume 11, Issue 01, Page 2.
Anton Kelly is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the lead teacher on all the Paddocks courses for the last 5 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.
This article is published under the Creative Commons Attribution license.
21 Comments.
Hi Anton. I understand the three scenarios for termination of the contract as per your examples, that this article is purely in the context of a termination meant to take place at the expiry of the contract. Fortunately I have never experienced otherwise, but what would be the scenario in the event where the BC / HOA believe that they have reason to terminate the contract due to non performance?
Hi Gert,
Any contract can be terminated due to non-performance. In a sectional title scheme, the managing agent contract is supposed to contain a provision that the trustees can cancel the contract without notice for non-performance. Prescribed management rule 46(2)(a) has the detail.
Without that clause, and in the case of HOA contracts, I would recommend getting proper legal advice before attempting to cancel a contract, as one might end up having to prove grounds in court and paying legal fees and compensation.
Regards,
Paddocks
Hi
Both our trustees have resigned and no other owner will stand for election in our 25 unit complex. Is there a company who will act as your trustee and what is the approx. cost?
Hi Martin,
It is possible to pay a professional outsider to act as a trustee. This is a service that Paddocks offers. You are welcome to contact us at consulting@paddocks.co.za.
Thanks,
Paddocks
Hi
Our body corporate does not have a contract with our current managing agent.
The Trustees gave them 30 days notice but they are insisting on 2 months notice.
As there is no valid contract in place can we insist on the 30 days
Hi Alan,
Please see below for how we can help:
– We offer consulting via telephone for R390 for 10 minutes. Please call 0216863950.
– We have Paddocks Club, an exclusive online club, headed by Prof Graham Paddock, to help you get answers to your questions about community schemes: http://club.paddocks.co.za/
– We offer a Free Basics of Sectional Title short course starting soon: http://www.paddocks.co.za/courses/free-basics-of-sectional-title/
Kind regards,
Paddocks
Hi
This article is dated before the new Act came in – do you have an update of the article ?
Hi Butch,
Thanks for your comment. Yes, there is an update that was released on Paddocks blog, here.
Kind regards,
Paddocks
Hi, I have recently joined a board of trustees following concerns regarding the running of our complex by previous trustees and the managing agent. Just before the body corporate there was a resolution that was signed saying that the Managing Agent contract is now three years and cannot be cancelled annually as per what you describe above. I find this strange. Are they allowed to do this (i.e. 3 year extension with no ability to cancel until 3 months before the 3 years unless there is a non-performance issue)?
Hi Nomcebo,
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
Anton – Can a Managing Agent refuse to supply a new owner a copy of the contract between the Complex and Managing Agent. We are trying to determine what the contract entailed. Also, which course would you suggest I attend (with Paddocks) to aid me in gaining knowledge on the following: We have a board of trustees that seem to come up with legal reasons why they cannot be voted out every year. We are desperate and I have been approached to find a solution for the next AGM. Some being so desperate that they are now considering selling their property.
Hi Pearl,
Thanks so much for you comment, we will be in touch shortly, via email, to advise the best way forward.
Kind regards
Paddocks
Good day
I’ve recently bought into a brand new complex and would like to know how about management agents are chosen.
Our first meeting occurred 4 months ago and we were thrown with figures, extremely unethical and didn’t want to listen to us as the community. I raised my voice and voted again this management agent. agent. At the end of the meeting we were forced to pay and were completely unhappy With this management agent. Kindly advised if this payment is compulsory as I haven’t signed or agreed to anything
Hi Jason,
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 a 1-week Free Basics of Sectional Title short course.
– 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
Hi.
Our managing agents contract expires on the 30th December 2018. we are disatisfied with their service, Can we refuse to sign a new contract and terminate it, and run a month to month basis, until their 3 months notice period runs out. We are a body corp.
Can the trustees do this or do we require a special general meeting to end the contract?
Hi Murray,
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
Andre
Can the board of a Home Owners Ass appoint a Managing Agent without consulting the HOA members at a general meeting?
Hi Andre,
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 a 1-week Free Basics of Home Owners’ Association short course.
– 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
I have a question.
I bought and moved into a sectional title complex in October 2017. Since then, I have not been invited to any AGM meetings. I keep asking when it will be held, but they can’t give me an answer.
In August 2018 they increased our levies without giving us a proposed budget at an AGM first, the trustees alone approved the budget without first letting all owners review it at an AGM as we have not had an AGM yet.
The managing agent is forcing us to pay the increase levy tariff. This seems illegal to me.
What are the rules regarding levy increase and budget approvals and the AGM?
thank you.
Hi Liza,
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 a 1-week Free Basics of Sectional Title short course.
– 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
Hi
My question is regarding the termination of the services of a managing agent and replacing them with a new one. Can this only be initiated by the trustees/body corporate or can this be done via the request/petition of the owners assuming it is a majority request.
Regards
Darryl