select
|

Body corporate trustees and managing agents make or break sectional title developments

The success or failure of sectional title schemes today is dependent to a large extent on the body corporate trustees and their managing agents. However, this simple fact is often forgotten by the developers who appoint the managing agents for the first year and by the body corporate members/owners who have to elect the trustees who will run the development going forward.

“The biggest cause of failure in sectional title developments is ignorance,” says Paul Henry, Managing Director of Rawson Developers. “Trustees are seldom aware of their responsibilities towards the members of their body corporate as determined in the Sectional Titles Act. They may be experienced business men and women in their own right but they have never properly studied the Sectional Title Act.”

“In the circumstances, the performance of your managing agent is crucial,” says Henry. “The managing agent’s portfolio manager, responsible for a particular body corporate should be fully au fait with the requirements of the act and should provide guidance to trustees in all their decision-making. Trustee meetings should be attended and managed by a managing agent who is capable of guiding the trustees in practicing good corporate governance and correct procedure and not by a clerk who has been sent there to take the minutes.”

Reminding the property investment public of these facts, Henry said that he has seen many instances where the elected trustees and/or their managing agents were disinterested or ineffective. There have also been certain rare cases where the managing agents have embezzled thousands of rands which were entrusted to them. Managing agents lack of presence and input, he said, almost invariably led to developments deteriorating as a whole and losing their value and this applied almost as much to smart upper bracket projects as to those in the more affordable groups.

It has to be realized, Henry added, that before a bank will grant a mortgage bond for a sectional title scheme, it will insist on seeing the development’s accounting records. If these then reveal any inefficiencies or negative trends, the loan will not be forthcoming. This, in turn, means that sales in the scheme will become difficult or even impossible and its deterioration will be inevitable.

“The first year in the life of a development,” said Henry, “is probably the most crucial time of all. It is in this first year that the disciplines have to be established and body corporate members and their tenants must be made aware of their responsibilities to each other and to the development as a whole. Furthermore, it is the trustees’ duty to establish and enforce the rules through which the development is run. This can often involve embarking on a comprehensive educational programme for owners and their tenants, especially in the more affordable developments where it can happen that many of the residents will never before have lived in close proximity with each other.

“In that first year, too,” said Henry, “the board of trustees and their managing agent will see to it that the developer shoulders all of his responsibilities as regards snagging repairs. They will at some stage, usually within 12 weeks of the completion, insist on a formal handover of the building, at which all snags will be noted and listed and the developer will have to commit himself to a fixed date by when they will be repaired.”

Repeating what the Rawson Property Group Chairman, Bill Rawson, has said on several occasions, Henry stressed that it is essential for all body corporate members to attend the development’s annual general meetings and any special meetings called. At the AGMs, he said, as many as possible of the trustees elected to represent the members should actually live on the premises. When too many absent trustees are on the committee, problems tend to go unnoticed and are not attended to.

The trustees, he added, must also keep a close check on the managing agent. All expenditure must be authorised by the trustees and regular discussions regarding maintenance and repairs need to take place. Great care should also be taken in the original selection of the managing agent.

“It has been estimated,” said Henry, “that almost 25% of South Africa’s sectional title projects are in financial difficulty. It is also true, however, that this has in almost all cases been due to ignorance and poor management, which have resulted in owners’ debt levels rising and all the usual problems that follow on from this situation.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK