Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Sectional Title scheme management options

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By Anton Kelly

There is a surprising variety of options the owners in a sectional title scheme have regarding who manages their scheme. This is especially so in small schemes, particularly those that are well funded.

The Sectional Title Schemes Management Act, 8 of 2011, “the Act”, states that “The functions and powers of the body corporate must … be performed and exercised by the trustees…” so the first option the owners have is to allow the trustees to manage the scheme, which they must do subject to the terms of the Act and the scheme rules and, significantly, also subject to any restriction or direction given to them by the owners by resolution taken at a general meeting.

Consequently, the owners can tell the trustees how they want the scheme managed. They can’t, of course, tell the trustees to do something that conflicts with the Act or the rules, and they can’t take away any power the trustees have. They could direct the trustees to employ a caretaker, a gardener, a security guard, or they could direct the trustees to outsource all the maintenance, gardening, and security functions.

The trustees usually operate as volunteers but if, as is quite frequently the case, people are reluctant to serve as trustees, the owners can make the service more attractive by paying the trustees. This decision must be made by special resolution and, of course, accommodated in the annual budget. If trustees are paid, the owners can expect more commitment than from unpaid trustees.

Depending on the nature of the scheme, and of the owners, management of a scheme can be relatively easy or very challenging. One of the challenges is complying with the applicable legislation. Scheme managers need to have a thorough understanding of the interlocking provisions of sectional title legislation and at least a general knowledge of the applicable provisions of other legislation that affects management, for example, labour law, health and safety law, and local municipal by-laws. Given this complexity, the owners may prefer to entrust the management of the scheme to a managing agent, who can advise on the relevant legislated provisions and see to the financial, administrative, and physical needs of the scheme. The prescribed rules give the trustees the discretion to appoint a managing agent but if they do not, the owners can take that decision by ordinary resolution.

Perhaps the most important thing about having a managing agent manage the scheme is the management contract. The Act and prescribed rules require delegations of trustees’ functions to be written, detailed and to include any amounts the agent can spend and any conditions that apply. Specific to a management contract, the detail must include what financial, secretarial, administrative, and other management functions the agent must perform. These are all elements of scheme management that the owners can direct the trustees to include in the contract.

In schemes where no one is prepared to serve as a trustee, for whatever reason, the body corporate can, on the authority of a special resolution, appoint an executive managing agent who will take the place of the trustees and perform all their duties. Read together, the provisions allow for a scheme to have trustees or not to have trustees when an executive managing agent is appointed.

The main duties of the executive managing agent are laid out in the prescribed rules and he or she must report to the body corporate at least every four months, so the members can keep a close eye on what has been done, what has been spent, and all the decisions made by the executive managing agent.

As mentioned above, the full variety of management options provided in terms of the Act and prescribed rules is practically only available to smaller and well-funded schemes. Very large or cash strapped schemes are more limited in their choices.

Please contact consulting@paddocks.co.za for a no-obligation quotation for advice on scheme management options, or a review of a management agreement.

Image source: avidfirefly.co.za

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