Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Checklist for managing agent contract

checklist1

By Anton Kelly

It’s surprising to hear that not all sectional title schemes have a written contract with their managing agent! I guess, if there is a long-standing good relationship between the trustees and the managing agent, neither party might see the necessity for a written contract.

Prescribed management rules (PMR) 46 and 47 deal with the appointment of a managing agent and the revocation of the contract. The first provision deals with the authority to employ a managing agent and specifies that the contract must be in writing.

An interesting point is that the rules bind the body corporate, owners and occupiers of the scheme; they don’t bind the managing agent. The rules regarding managing agents therefore regulate how the trustees must contract and deal with the managing agent. It is the trustees who are specifically responsible for ensuring that the contract with the managing agent complies with the requirements of PMR 46 and PMR 47. One of the reasons this is so important is that these rules include protections for the scheme and for the managing agent.

So what are the provisions the trustees must ensure are included in the contract, and what are the provisions that should or could be included?

Obligatory inclusions:

Term of the contract
PMR 46 provides that the managing agent’s contract must run for one year and is automatically renewed unless the body corporate notifies the managing agent to the contrary. What the rule does not specify is the notice period, so the trustees need to make sure the period is included in the contract, otherwise when the time comes for a parting of ways there could be arguments as to what is reasonable notice under the circumstances.

Cancellation
The trustees must make sure that the contract includes the provision that they may cancel the contract without notice if the managing agent is in breach of the terms of the contract or behaves in a way that would justify the dismissal of an employee, and that the managing agent has no claim against the body corporate as a result of that cancellation.

Revocation
The contract must also provide that the appointment is revoked under three sets of circumstances:

One, if the managing agent, as a juristic person is liquidated or placed under business rescue proceedings, or as a natural person is sequestrated or goes insolvent.

Two, the managing agent or any directors or members of a managing agency company are convicted of an offense involving fraud or dishonesty.

Three, if the body corporate takes a special resolution revoking the appointment. In this case, the managing agent would be able to claim compensation or damages for the loss of employment.

Discretionary inclusions:

The trustees must decide on what they want the managing agent to do and they need to make certain that the tasks, duties, responsibilities and discretion of the managing agent are absolutely clear in the contract. Some of the areas the trustees need to consider and decide on include:

  • Preparation of the annual budget.
  • Preparation of the schedule of insurance of the building.
  • Dealing with any insurance claims that might be made.
  • Maintenance of the common property.
  • Accounting and bill paying.
  • Notice and minutes of meetings.
  • Dealing with owners’ complaints.
  • Enforcing the rules.

Each scheme is different and each board of trustees is different and will have different requirements from time to time, so the managing agent’s contract needs to be re-considered regularly.

Image source: airforceenlistedfamilies.com

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5 comments on “Checklist for managing agent contract

  1. Vivien Stevens
    January 31, 2016

    I’m sorry this is long. Please bear with me as I am quite concerned – should I be? On becoming a trustee at the 2015 AGM I started doing my homework. I discovered there is no written contract with our MA. This week’s enquires have uncovered that neither the business name they operate under nor the two owners of that business appear to have FFC’s, even though the one (who controls our BC and the Board of Trustees without impunity) told me he is also an estate agent involved in selling a new complex (see next paragraph) for which he will also be the MA. He talks as though everything belongs to him. I have given the EEAB the business name, their personal names and their business registration number and no FFC’s come up.
    They manage several complexes including a few contained within the large mixed residential use estate in which they live and from which they operate. Googling the business name produces no results. The business name is registered on the CIPC website.
    At the Trustees meeting last week I had concise notes on several items on the agenda. 3 of the 6 Trustees didn’t pitch. The Managing Agent controls and chairs all Trustee meetings. The chairman is young and hardly opens his mouth. Neither the chairman or the other trustee brought so much as a copy of the agenda.
    We didn’t get through the agenda as the MA talks non stop, about things not on the agenda or about himself and his projects. When you try to ask a question or get back to the agenda he talks over you but when he is addressing the agenda he cuts you off when he considers enough has been said on a subject.
    The finance trustee was a no show but I had made notes that the inc. statement for the YTD reflects we are overspent by double on our maintenance and 2 other items in the budget and yet the MA was allowing the caretaker (employed by the BC but works only with the MA) to remove carport shade cloth without informing the Board as a whole or even the Chairman! When the Chairman asked why they were removing shade cloth and expressed concern it was done while his cars were parked underneath, he was told the cloths were damaged and when the caretaker informed the MA that the contractors were on site at our sister complex (joint HOA also controlled by MA) he instructed the caretaker to tell the contractor to remove 5 double shade ports on our side too. With regard to cars being parked underneath at the time we were told the contractor concerned is excellent so no need to worry! I supported our Chair when he said he would still have preferred to have been given the opportunity to move his car and we were ignored.
    I queried the cost of the repairs and was told they’ll be submitting an insurance claim. He said we shouldn’t report on other trustees portfolios as that is their speciality. Our FC trustee hasn’t been available for the last 2 meetings. I asked what expertise she has in finance, he couldn’t say. I ran the finances of our business for 8 years before retiring, (R12m a year T/O, Sage accounting and payroll, all SARS returns, in depth exp with GP’s and WIP and know my way around an income statement). We had only one meeting after the AGM last year, in September at which we were given our portfolios. Mine is maitenance. I did a thorough walk through the complex with the previous caretaker and another concerned lady resident, ahead of the Nov meeting, (which was cancelled, only myself and the chairman were available for the Nov 2015 meeting so the MA simply cancelled it saying he was unavailable thereafter, and rescheduled it for 28 Jan 2016) and noted all areas needing attention. On trying to present this at last weeks meeting the MA told me he had asked the caretaker to compile a maitenance plan for the next budget – so I emailed my list to the caretaker and the MA!
    I had numerous questions about the proposed reserve fund regulations, which neither the chairman, nor the other trustee knew anything about and basically the MA overrode everything I said, gleaned from what I’ve read on this website among others, said we’d address it and when and if it is enacted. I asked for a copy of our annual maitenance plan and was told there isn’t one drawn up for specific planned maitenance. There is a minimum balance in the reserve fund.
    When I snapped and told the MA that this was a Trustees meeting not an MA meeting, the other Trustee leapt to his defense and said I was out of order as the MA does an excellent job. That appears to be true, our accounts are audited in all appears to be in order BUT but at the same time no-one appears to ‘manage’ him to the extent that he tells the Board what he is going to do and they blindly follow without question.
    Is a bullying MA a good thing or something to be wary of?
    Vivien

    • Paddocks
      February 3, 2016

      Hi Vivien,

      Thanks for your questions. We do not offer free advice, however we answer one question a day on our Paddocks Facebook page. Alternatively, you can contact our consulting division on consulting@paddocks.co.za or call 0216863950 for assistance.

      Regards,
      Paddocks

  2. Desiree
    December 31, 2015

    Les, We have chosen a managing agent who is a member of NAMA and it was the biggest mistake we made as he is absolutely useless and clueless, rude and arrogant. So to advise any body corporate to do this is dangerous and is not in the best interests of the body corporate!

    Furthermore Nama says they cannot recommend or suggest a managing agent who is listed with them for professionalism as that would ‘favour’ one above the other – so then I must ask myself must I play “eenie meenie mini moh’ and choose one from their long list and then get another useless and stupid one without a recommendation.

    Nama is NOT the way to go!

    There is really NO one or no body structure who is controlling the managing agents performance so the trustees just have to either be put up with them or suck one from their thumb who will give the service that is required of them.

  3. Camelot Body Corporate
    December 9, 2015

    Their e-mail signatures reveal their Paddocks/UCT STSM qualifications, but those are meaningless if they can “forget” that an AGM with audited financials HAVE TO BE arranged within 4 months of the end of a financial year. It was considered “breach of contract” by our trustees and they were given notice. Now there is only a financial officer, no managing agent, a treasurer and 3 trustees. We do not need nor require a formal managing agent for only 12 units.

  4. Les
    December 9, 2015

    It is very important to note that the Managing Agent must be an Estate Agent with a Fidelity Fund Certificate (ask for a copy) the FFC protects your body corporate against fraud and theft by the managing agent. Appointing a managing agent could be considered gross negligence by the trustees and they could be held liable in their person capacities for any losses the body corporate may suffer.
    Choose a managing agent who is a member of the National Association of Managing Agents (NAMA) you can check on members by going on their web site (Namasa.org.za) You can also check with the Estate Agents Board on members on their site (eaab.org.za).
    I also feel it is important to visit their offices and see what that is like, go unannounced so you can see what their working conditions are like.
    Do they have sufficient professional staff to cope with your body corporate?

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This entry was posted on December 9, 2015 by in Financial, Legal, Lifestyle, management, Meetings, Online education, People and tagged , , , .

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