It is unfortunate that the increasing popularity of Sectional Title (ST) living in SA over the past fifteen to twenty years has not been accompanied by similar growth in the number of ST owners who are qualified or even willing to act as trustees, and an increasing number of schemes are now turning to a new and little-known management rule to resolve the problem.
That’s the word from Andrew Schaefer, MD of national property management company Trafalgar, who says the whole sectional title “system” in South Africa is designed around the trustees elected by owners to manage the affairs of their sectional title schemes – and that things can quickly start to unravel when there are too few people willing to take on the responsibility.
“Effective trustees are the backbone of sectional title living and ultimately responsible for protecting home values in sectional title schemes. Even the sectional title legislation is written to empower the trustees to do certain things on behalf of the other owners, from collecting levies, setting budgets and enforcing conduct rules to organising the maintenance of the common property, arranging for any repairs necessary and appointing a managing agent.”
However, he notes, acting as a trustee – which is a voluntary, after hours and unpaid position – has become an increasingly complicated, time-consuming and often thankless job, with the result that an increasing number of schemes are now struggling to find enough people willing to take it on.
“And that could become a real problem for the sector, which currently accounts for around 40% of all new residential construction and an estimated R650bn worth of existing homes – unless more schemes start to make use of Prescribed Management Rule (PMR) 28, promulgated in October 2016.”
Schaefer says that under the Sectional Titles Schemes Management Act (STSMA) which came into operation last year, this little-known PMR provides for the owners that make up the body corporate to take a special resolution to appoint an “executive managing agent” to perform the functions and exercise the powers that would otherwise be performed and exercised by the trustees.
“Alternatively, if there are not even enough interested owners to hold a meeting and pass the special resolution, owners who collectively hold 25% of the scheme’s total participation quota can apply to the Community Schemes Ombud Service for the appointment of an executive managing agent.”
In terms of the rule, he says, this executive managing agent is:
- Subject to all the duties and obligations of a trustee under the STSMA and the rules of the scheme;
- Obliged to manage the scheme with the required professional level of skill and care;
- Liable for any loss suffered by the body corporate as a result of not applying such skill and care;
- Obliged to arrange for the inspection of the common property at least every six months; and
- Obliged to report to all the members of the body corporate every four months on the decisions taken with regard to the administration of the scheme and its finances, and the balance of its reserve and administrative funds.
“In short, the executive managing agent must be prepared to carry quite a heavy burden. So although the rule does provides an handy solution for bodies corporate that don’t have enough trustees, it is clearly also intended to ensure that they don’t make random appointments, but rather seek professional assistance from a property management company which has the all necessary resources and systems in place to fulfill these obligations.”
Indeed, Shaefer says, the company is already acting as executive managing agent for several ST schemes, and the number of enquiries with regard to this service is increasing monthly.