With the impending publication of Sectional Title Scheme Management and Community Scheme Ombud Service Bills for public comment, the issue of regulation of the managing agency profession has come sharply into focus.
Scope and history of managing agency
With the rapid increase in the number of sectional title schemes in the 1980s, a new market niche appeared. The conversion of many older buildings to sectional title tenure and the substantial number of new developments that are developed as schemes or homeowner associations has continually increased the need for specialist managing agency services ever since.
When one considers the range of “community schemes” as that term is defined in the Community Scheme Ombud Service Bill (“the CSOS Bill”), they all require either volunteer or professional management services. They are obliged to manage themselves in accordance with their various governance provisions and they must collect levies from their members for this purpose. The various types include:
- sectional title schemes;
- share block schemes;
- group and cluster housing schemes (often referred to as “gated villages”) controlled by homeowners associations; and
- city and residential improvement districts (created under provincial legislation or local authority by-laws) that operate various security and other para-municipal services within a neighbourhood.
Retirement housing schemes (regulated by the Housing Development Schemes for Retired Persons Act 65 of 1988) are also community schemes, but most of them are operated by their original developers and do not require the services of independent managing agents.
“Adoption” of managing agents by the EAAB
Because the estate agency industry had for some time been regulated by the Estate Agency Affairs Board (“EAAB”), which operated a suitable insurance programme in the form of its Fidelity Fund, he issued a notice declaring that “collecting or receiving moneys” due to a body corporate or share block company or developer was an “estate agency service”. In this way managing agents became “estate agents”, they became obliged to keep their clients’ money in trust accounts and any money stolen from these accounts was covered by the EAAB’s Fidelity Fund.
Problem solved? – Not from the Managing Agents’ perspective!
The managing agency profession has lobbied to have the EAAB’s supervisory role extended to cover other managing agency functions, but no progress has been made in this regard. The EAAB initially suggested that managing agents should form a national association with voluntary membership. The National Association of Managing Agents (“NAMA”) was accordingly formed and it presented a Code of Conduct designed for managing agents to the EAAB in October 2003. Despite two or three meetings per year ever since and positive verbal feedback, neither the Department of Trade and Industry nor the EAAB has taken any visible steps to recognise managing agents as a separate category of estate agents or to regulate their activities.
Managing agents pay to the EAAB a registration fee for each managing agency business and for each of the principals involved in that business to whom it issues Fidelity Fund Certificates. Portfolio managers remain unregistered. Managing agency businesses also pay the EAAB one half of the interest that accrues on monies in their trust accounts and is not claimed by their clients.
Implementation of the suggestion – not a problem
Managing agency under the Sectional Titles Act:
The prescribed or model Management Rules do make specific provisions for the employment of managing agents, specify various provisions that must form part of the managing agent’s contract and include various other provisions that deal with managing agents. But no provision in or under this Act regulates the conduct of managing agents.
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