Advice and Opinion

Two fundamental steps essential if Body Corporates are to function effectively

Bill Rawson, Chairman of the Rawson Property Group, has drawn attention to the fact that sales of properties in holiday areas, particularly the coast, are now 8 to 12% up on the January/February period of 2014 – and the majority of these sales are in sectional title units, many of which are new and which are seen in the public’s mind as likely to offer the best growth potential and the securest type of lock-and-go investment.

However, said Rawson, with this new trend in sales now gaining momentum it is necessary to remind buyers that certain preliminary investigations should precede any purchase of this kind, particularly in a far-distant sectional title scheme. These, he said, have recently been covered very thoroughly by the sectional title expert, Tertius Maree, one of the recognized authorities in this field.

Maree, said Rawson, has warned that sectional title schemes are only as good as the managements that control them – and to achieve a satisfactory management, two initial steps are essential. These are the setting up of a set of rules for all owners and occupants of the scheme and the appointment of trustees who are competent and well informed.

“Maree makes it quite clear,” said Rawson, “that certain developers of sectional title units are concerned primarily to sell the units and then walk away as quickly as possible. Such developers quite often follow the simple, easy route of adopting a standard set of rules which may well be totally unsuitable for their particular project. They may argue that the owners of the units after living there will be in a better position themselves to set up appropriate rules, but, this is an invalid assumption, firstly, because the members of the body corporate (the owners) frequently lack any property experience themselves and, secondly, because it can often be difficult to change these rules, a complicated voting procedure having to be worked through.”

Even more serious, said Rawson, is the fact that the owners who become trustees will often lack the experience and knowledge required for this job. As a result they may accept an arrangement whereby the developer, through a subsidiary company or division plays a management role in the scheme – for a fee. All too often this is structured to the developer’s benefit above all else — and does not work efficiently.

They should realize at the outset that it is important to appoint competent people with the right experience, either in property or in a related business, as trustees.

“Owners should also accept that any one of them might themselves be called up to serve as a trustee and if they have appropriate experience they should not resent this. In addition, they should accept that new trustees may require educating and that it might be necessary to pay for this with a competent lecturer or trainer.”

Especially on large schemes, the owners should accept this as necessary and budget for the appointment of an experienced independent managing agent. This will, said Maree, reduce their own workload and should greatly improve the efficiency of the scheme’s management if the right agent is appointed.

Rawson added that his development team has often found that it pays on a new scheme to ensure that they themselves retain certain units – usually for rental purposes – and then get themselves appointed onto the Board of Trustees where they can guide other trustees in how to perform their duties. Such arrangements, he said, usually last for at least three to five years, after which the trustees will probably know the ropes and can manage without the help of a delegate.

“It has to be acknowledged,” said Rawson, “that completely satisfactory schemes have failed to appreciate in value as they should and some have even gone badly downhill for the simple reason that the Board of Trustees appointed was either indifferent or too naïve to understand their duties, often being under the impression that by accepting a position on the board they would be doing the chairman or their fellow body corporate members a favour. Such people, it has been found, frequently fail to accept that being a trustee involves serious obligations which it is their moral duty to live up to.”