By the Paddocks Club team

Below are examples of two questions on the Paddocks Club discussion forum, to show you what is available to our Community members!

Must managing agents have a fidelity fund certificate and what experience is required to manage a portfolio?

Member’s question:

Hi Graham,

1) Are there any exceptions to a Managing Agent being required to hold an fidelity fund certificate?

2) Are portfolio managers required to have a certain amount of experience in managing sectional schemes prior to being able to independently manage a portfolio?

Thanks!

Graham’s answer:

Dear member,

2. Your second question is easier.

No, there is no legal requirement for particular training or experience before a person takes independent control of the management of schemes in a managing agency. Such requirement / standards would make sense, but the managing agency industry is not regulated by legislation yet, except for the “receiving or collecting” of levies as discussed below, which is an incidental “estate agency service” regulated under the Estate Agency Affairs Act. The Estate Agency Affairs Act itself does not deal with managing agency at all, only the sale and letting of property.

The principal owner of an estate/managing agency must hold a fidelity fund certificate if the agency “receives or collects” levies from sectional title or share block schemes.

1. There is an argument as to what the phrase “receives or collects” means. There are people who offer scheme management services and ensure that their client schemes’ money always goes into accounts in the schemes’ names, never into their own accounts.  Their argument, which makes sense to me, is that these people are not estate agents because they are not performing an “estate agency service” as defined in the Estate Agency Affairs Act regulations. While they may send out invoices and reminders, they never take possession of any scheme money, therefore they are not legally required to have a fidelity fund certificate and there is no need for that “insurance”.

The Estate Agency Affairs Board argues that the phrase “receives or collects” includes sending out invoices and reminders. They have from time to time taken action against the type of operators described above who are not registered as estate agents.

Paddocks advice to people who want to start their own managing agencies, i.e. want to be “owners / principals” in such a business is: If you don’t ever touch scheme money, the law does not require you to be an estate agent or have a fidelity fund certificate, but you should do the exams (as exasperating as it may be to learn about letting and selling when what you want to do is manage), qualify as an estate agent and get a fidelity fund certificate because if your agency grows to any appreciable size you will want to offer schemes the ability to collect their money in your account. And at the moment, to offer that service one of the owners/principals needs to be an estate agent and hold a fidelity fund certificate.

There are obvious absurdities, and the law should be changed so that managing agency is properly regulated and all those who work in it are held to reasonable standards of performance and fidelity. The Property Practitioners Bill has been passed and it may do what is required. The statute covers managing agents, but we have yet to see the regulations that will apply under it. The Act itself makes no special provisions for managing agents, but hopefully the regulations will set minimum standards, perhaps in a code of conduct that deals properly with client money and fiduciary duties.

Graham.

Can the body corporate force me to  remove this palm tree?

Member’s question:

Hi team,

We have been ask or rather ordered to remove a palm tree that is situated in the exclusive use area of our unit. As mentioned in previous discussion regarding question around exclusive use area emergency/service exits. Another palm tree in front of the unit was removed a while ago, which was damaging the driveway of the complex. That is understandable.

Just after that we was informed by the body corporate that the palm tree in our exclusive use area was to be removed because the Tree Removal Contractor has informed the chairman that insurance will not pay out for any damages cause by that tree if it was struck by lightning. We did contact the complex insurance company regarding this. Their comments was that it is not part of their regulations or requirements that the trees must be removed. The tree must be maintained and trimmed.

It is then when it transpired that the owner next door was complaining about the palm tree. He has a big thatch lapa that is attached to his unit and was concerned about the tree get struck by lightning and causing damage to his lapa. The insurance company was never informed about this thatched structure and duly did asked the owner to oblige to the requirements regarding thatched structure.(fire extinguishers,etc)

We ignored the request to remove the tree but was later instructed in writing by the body corporate to remove the tree within 30 days on our own cost.

Question is…
Are we obliged to do this?
If so, must it be on our own cost?
If not obliged to do, cant we just maintain the tree and cut off the dry leaves or is it the body corporate’s responsibility?

Problem is that the only way to get access to this tree is through our front door, living area and kitchen. Can you imagine all the equipment, ladders, rubble and palm tree remains going through your living area?

Many thanks!

Graham’s answer:

Dear member,

The principle is straightforward. You can’t use your property to cause a nuisance to another.

In this forum we only give general advice, so here it is: If you want to resist the demand to remove the tree, you should focus on arguing that it is not in fact a nuisance to the next door owner or anyone else. In the context of this particular scheme, your having the tree is a normal use of an exclusive use area. At the same time it may well make sense to trim the tree.

As to costs, the body corporate is obliged to recover from you any amount it spends on the tree – please read section 3(1)(c).

I suggest that you spend a few minutes reading chapters 6-11 of the ST Survival Manual, which you can find under the heading Books above. It will give you answers to many of your questions.

Graham.


Article reference: Paddocks Press: Volume 14, Issue 02.

Graham Paddock and Ané de Klerk are available to answer questions on the Paddocks Club discussion forum for Community members. Get all your questions answered by joining Paddocks Club.

This article is published under the Creative Commons Attribution license.

Back to Paddocks Press – February 2019 Edition.

4 Comments.

  • 2019 -after the new STSMA ruling in October 2016 – and with managing agent having access to BC accounts – is it still a requirement for the managing agent to have an updated Fidelity certificate registered with EAAB

    • susan, may not be the right place to ask but docs re “2019 -after the new STSMA ruling in October 2016 – and with managing agent having access to BC accounts – is it still a requirement for the managing agent to have an updated Fidelity certificate registered with EAAB”

  • Will our insurance pay for any common property damage if our managing agent is not registered with the EAAB OR NAMA?

    • Paddocks
      20/03/2020 10:32

      Hi Pamela,

      Thank you for engaging.

      That’s a great question. This is something our attorneys would be able to assist with. 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.

      Kind regards,
      Paddocks