April 10, 2017
Can you manage?
Sectional title law no 4 – The role of managing agents
In our occasional series on sectional title law, so far we have looked at the role of the trustees in a complex, the rules for general meetings of owners and the role of the Chair, and financial management and record-keeping. In this penultimate article we will examine the role and duties of managing agents.
What is a managing agent?
As a trustee you may be more than willing to fulfill your moral and fiduciary duties to the body corporate and scheme members, but you may struggle to find the time to fix the gate motor or mend a leaking roof. This is where managing agents come in. They can relieve trustees of a considerable administrative and maintenance burden. Managing agents are appointed to perform functions of the trustees, and this delegation of duties is clearly permitted in the legislation.
Prescribed Management Rules
The Sectional Titles Act, 95 of 1986 allows for schemes to employ managing agents and makes considerable provision for their engagement. Prescribed Management Rules – PMRs – set out the functions and powers of the trustees, but the Act does not prescribe the functions of the managing agents specifically. Rather, it provides for their employment, their interaction with trustees, and their execution of the trustees’ functions, by stating that the details of the engagement should be clarified in a written contract. Thus the agent’s duties are not enshrined in the legislation but in the contract. However, those duties must uphold the trustees’ responsibilities in terms of the PMR.
Limits to managing agents’ powers
There are certain duties trustees may not delegate. Responsibility for the oversight of the scheme and fiduciary accountability remains the remit of the trustees. They must ensure the managing agent’s performance complies with the contract satisfactorily. How much power the agent has to enforce certain scheme rules, e.g., to control number of occupants per section, to manage and review the garden service, to levy fines for non-compliance with rules, etc., will be determined by what has been set out in the contract, which in turn must reference scheme rules.
What must the managing agent do?
A managing agent is literally the agent of the trustees and therefore is subject to all their duties and obligations. The agent is expected to act with professionalism at all times. Agents who do not act with due care and skill may be liable for any loss caused as a result of their negligence or neglect. Notwithstanding the fact that trustees have ultimate fiduciary responsibility, the agent is also responsible for prudent financial management of the scheme. They are expected to arrange an inspection of the property every six months and report to the body corporate every four months on the ongoing administration of the scheme, detailing any repairs and maintenance required, the balance of funds and a reconciliation statement, expenses incurred since the last statement, and any other matters deemed appropriate to bring to the trustees’ attention.
As mentioned above, it is vital that the details of the agent’s engagement and the duties expected should be laid out in a written contract. This contract must not be more than three years in duration and may be cancelled by the body corporate or trustees with two months’ notice, should the performance of the agent not be satisfactory. The agent may also cancel the contract with two months’ notice.
Sectional title law is complex and the regulations are much more detailed than the highlights presented here. If you are a managing agent or a trustee seeking to appoint a managing agent and would like help drawing up the contract of engagement, give Simon a call on 087 550 2740 or 076 116 0623 or email email@example.com. SD Law & Associates are specialists in property management and sectional title law and will give you expert advice promptly and efficiently.