SECTIONAL TITLE OWNERSHIP: TRUSTEES VS MANAGING AGENTS

Laila Cassim | Conveyancing Supervisor

In our previous edition https://www.albaraka.co.za/blogs/legalease-2-2024/sectional-title-ownership-understanding-role-players-and-their-functions-and-services, we delved into the pivotal role of owners in sectional title schemes, highlighting their contributions to a harmonious and well-managed living environment. As we continue to explore the intricacies of sectional title ownership, this final edition will focus on the essential roles of trustees and managing agents, shedding light on their distinct functions, benefits, and challenges.

WHAT ARE TRUSTEES?

Trustees are elected at the Annual General Meeting (AGM) by the body corporate to oversee the day-to-day operations of the scheme. They can be either owners or non-owners and serve for one year, from one AGM to the next. Trustees are responsible for managing the building or complex according to the instructions and restrictions set by the owners during meetings.

HOW MANY TRUSTEES SHOULD BE APPOINTED?

In a sectional title scheme, there should be at least two trustees elected, but there is no prescribed maximum number. Typically, an odd number of trustees is preferred to avoid tie votes. If there is an even number of trustees, a chairperson may be elected who has the power to cast an additional vote or exercise veto powers to break ties. This ensures smooth decision-making within the board.

WHAT ARE THE RESPONSIBILITIES OF THE TRUSTEES?

Trustees have a fiduciary duty to manage the property and finances in the best interests of all owners. Their key responsibilities include:

Holding regular meetings to address necessary projects and owner correspondence.
Keeping accurate meeting minutes and records of decisions.
Managing repairs and maintenance of the common property, obtaining quotations, and hiring contractors.
Handling requests from owners for alterations, pets, etc.
Enforcing the Conduct Rules and addressing complaints from residents.
Managing body corporate employees.
Reviewing financial statements to ensure the budget is on track and securing additional funds if needed.

The trustees may also appoint a managing agent to assist them with the daily running of the building or complex.

ROLE OF MANAGING AGENTS?

Under Management Rule 46 of the Sectional Titles Act No. 95 of 1986, trustees can appoint a managing agent to handle the day-to-day administration and operational tasks of the scheme. Managing agents can only act within the bounds of the contract they sign with the trustees and cannot make key decisions without trustee approval.

When selecting a managing agent, trustees should ensure the agent is a registered estate agent with a valid Fidelity Fund Certificate from the Property Practitioners Regulatory Authority (“PPRA”), as this protects the body corporate from financial losses due to theft. Trustees should also consider agents who are members of the National Association of Managing Agents of South Africa (“NAMA”), as this adds a further layer of protection for the trustees.

RESPONSIBILITIES OF MANAGING AGENTS?

If appointed, managing agents are generally responsible for:

Sending out levy statements.
Collecting levies.
Bookkeeping
Advising the trustees on matters.
Assisting with maintenance issues.

Managing agents bring expertise in property management and legal compliance, allowing trustees to delegate some of their responsibilities and ensuring the efficient operation of the scheme.

TRUSTEES’ VS MANAGING AGENTS – PROS & CONS:

Choosing between trustees and managing agents involves weighing the advantages and disadvantages of each:

Trustees:

PROS	CONS
1. Direct Oversight: Trustees are typically owners within the scheme, offering a direct stake in its management.	1. Limited Expertise: Trustees may lack specialized knowledge in legal matters, accounting, or property management.
2. Familiarity with the Community: They often understand the needs and concerns of residents better.	2. Time Commitment: Serving as a trustee can be time-consuming.
3. Cost Savings: Trustees may not charge fees for their services, saving money for the scheme.	3. Conflict of Interest: Personal biases or conflicts of interest may impact decision-making.
4. Flexibility: Trustees can respond quickly to issues without needing to consult external parties.	4. Liability: Trustees can be held personally liable for decisions that lead to financial loss or legal issues.

Managing Agents:

PROS	CONS
1. Professional Expertise: Managing agents bring specialized knowledge and experience.	1. Cost: Hiring a managing agent incurs fees, which can add to the financial burden of the scheme.
2. Time Savings: Hiring a managing agent frees up the time of trustees and residents.	1. Loss of Control: Trustees will be disconnected from the management process.
3. Access to Networks: Managing agents often have established networks of contractors and service providers.	3. Communication Issues: There might be communication breakdowns between managing agents and trustees/residents.
4. Risk Management: Professional agents help mitigate risks and ensure compliance with regulations, reducing the likelihood of legal issues.	4. Quality Variance: The quality of managing agents can vary, and if a poor selection is made, could adversely impact the management of the scheme.

CONCLUSION

Understanding the roles and responsibilities of trustees and managing agents is crucial for the smooth operation of sectional title schemes. Whether you are an owner, trustee, or considering appointing a managing agent, being informed about these key role-players will help ensure your scheme is well-managed and harmonious. As we conclude this series on sectional title schemes, we hope you feel more equipped to navigate the complexities of property ownership and contribute positively to your community.

For further details or advice in this regard, it is best that you consult with a Legal Practitioner.