The managing agent has demanded R3000 for a special levy” and “our managing agent has summonsed me for levy arrears”; or “the managing agent has decided not to fix the roof” and “our managing agent has allowed our block to deteriorate”. Four comments to the Helpline in the space of a single and typical day. Four alarming comments! How can it be that after so many years of Sectional Title in South Africa there is so little understanding of the basic principles of sectional ownership?

Not one of these functions rests with a managing agent. They are functions of the body corporate. Managing agents are not in a position to raise levies, hand-over levy defaulters, make decisions about repairs or be responsible for the state of the building. They act on the instructions of the trustees of the body corporate.

Their role is to assist the body corporate and trustees by providing specialised knowledge about Sectional Title and offering an administrative and accounting service. Very few bodies corporate can adequately manage their own schemes. Managing agents provide an essential service, but they are advisers, not decision-makers.

It is worth repeating. Within the structure of Sectional Title, the members of the Body Corporate are “The Boss”; the trustees are “The Representatives” and the managing agent “The Employee”. This hierarchy is entrenched in the Act and prescribed rules and is not open to negotiation.

One reason for the confusion about the managing agent’s role may be that most correspondence from the body corporate to its members appears on letterheads of the managing agent.

If there is a special levy, owners are notified on the managing agent’s stationery. The notice of intention to hand a defaulter over to an attorney is on the managing agent’s letterhead. In most cases, the letter is even signed by the managing agent, causing many owners to believe that the managing agent is acting independently and not on behalf of the trustees or body corporate. It is a fact that many owners associate a letter from the managing agent with bad news.

The Helpline received a call from an owner who said that as the money raised for a painting levy was deposited in the managing agent’s account, the agent was responsible for carrying-out the work and if he under-budgeted, then he should pay the shortfall! Does that owner understand anything about Sectional Title ownership?

There seems to be some confusion of late as to whether a person can hold more than two proxies or not. 

 The simple answer is ‘yes’: a person can currently hold more than two proxies – there is no limit at the moment.

The simple answer is ‘yes’: a person can currently hold more than two proxies – there is no limit at the moment. 

“At the moment” is key here, and this seems to be where the confusion comes in. Contrary to information being circulated, the proxy limitation has not come into effect yet. In terms of the Sectional Titles Schemes Management Act No. 8 of 2011 (STSM Act), which is not in operation yet, there will be a limit of two proxies for any person. 

Section 6(5) of the STSM Act states the following: “(5) A member may be represented in person or by proxy at such meeting: Provided that a person must not act as a proxy for more than two members.” 

Currently, under the Sectional Titles Act No. 95 of 1986 (the Act), there is no proxy limitation. It is also important to point out that rule 67 prescribed under the Act has not been changed. So unless a scheme has changed this rule, any person can hold any number of proxy appointments. 

What is a proxy?

A proxy is a person who has been appointed by an owner to attend, speak and vote on their behalf at a general meeting. 

Prescribed management rule 67 says that owners may cast a vote at a general meeting personally or by proxy and a proxy need not be an owner of that scheme. The proxy must be appointed in writing and a “proxy form” must be signed by the owner or by his or her authorised agent, who has also been appointed in writing. 

The signed proxy form must be handed to the chairperson before the meeting starts unless it is contained in a registered mortgage bond and the bond is produced at the meeting. A proxy form may include specific instructions on how the proxy should vote – if this is done then the proxy is bound to follow these instructions. 

Currently, one person could lobby other owners to authorise them to appoint the one person as their proxy, allowing the one person to vote for or against a motion in a manner that best suits their needs. 

When the two-proxy limitation comes into effect, this type of “concentration of voting power” in one owner will not be legal and owners will either have to attend meetings or appoint different proxies to have their votes exercised at meetings they cannot attend. – By Paddocks

The growing popularity of arbitration rather than litigation in sectional title property disputes stems from it being both less expensive and faster. 

 “In view of the effectiveness of arbitration it is important that all sectional title trustees and owners know how to go about it,” says Bauer.

This is according to Michael Bauer, GM of property management company IHFM, who points out that the Sectional Title Act’s Prescribed Management Rule 71 was recently amended so that now only the Chief Registrar of Deeds can appoint an arbitrator. 

Although this can delay the process slightly (previously any registrar could act in this way) arbitration is still preferable to litigation, he says. 

The Prescribed Management rule allows for arbitration between an owner (or owners) and the body corporate – or vice versa – and between one or more owners and another owner or owners. 

“In view of the effectiveness of arbitration it is important that all sectional title trustees and owners know how to go about it.” 

The steps in the process are: 

• “Serving”, i.e. delivering a first notice of dispute to the other party. This must state in full the nature of the complaint or dispute.

• Notifying the scheme’s trustees and managing agent of this.

• Waiting 14 days for a response, failing which either of the parties can then demand that arbitration goes ahead.

• Serving a second notice of dispute and proposing two or three suitably qualified and independent persons as arbitrators.

• Allowing three days for a reply, failing which, or in response to which, the complainant can ask the Chief Registrar for an arbitrator to be appointed – who will then guide both parties through the arbitration process.

 Bauer says “thankfully” just the threat of arbitration often brings about a settlement because it is now widely known that the loser may end up having to pay not only what is demanded (if cash is involved) but also the legal costs for himself and his opponent.

He adds that Prescribed Management Rule 71 will fall away when the Community Schemes Ombud Services Bill comes into the effect.

30 Jan 2012

If, after a warning the tenant continues to upset his neighbours, the body corporate may be entitled to impose a fine, and this can be onerous, often over R1 000, says Strandvik.

Ulrik Strandvik, a Gunstons Attorneys director warns that investors in buy-to-let property should be aware of the dangers before they take the plunge.

He says a particularly serious situation can arise if the investor buys into a sectional title scheme then places a tenant in his unit, only to find in time that the tenant’s behaviour is unacceptable to his fellow members and the trustees of the body corporate.

If, after a warning the tenant continues to upset his neighbours, the body corporate may be entitled to impose a fine, and this can be onerous, often over R1 000, says Strandvik.

He adds that the snag is that this fine is payable by the owner. “What is more, the interest on it, if not paid, can be charged at compound rates – and the legal fees, if an attorney is hired, are also for the owner’s account.”

Attempts to ignore these fines, says Strandvik, will simply result in the amount owed growing month by month and, if the fine is related to putting certain matters right, e.g. fixing broken windows or doors and this is not attended to, the trustees are entitled to impose a further fine

In this situation, Strandvik says a good rental agent if the landlord has one, will immediately inform the owner of the problem and arrange in some way to get the fine paid before it is added to.

He says this may involve the owner having to pay out of his own pocket. He can in his own time then take legal steps to recover the amount paid from the tenant – and he can, if the worst comes to the worst, deduct the sum owing from the tenant’s deposit, when his lease expires – but this will reduce the amount claimable for damages at the end of the lease.

An additional danger is that the rental agent may try to hide the facts from his landlord, in the hope that he can put matters right, says Strandvik. However, he adds that experience shows that the type of tenant who incurs these penalties is also the type who ignores debt claims and is constantly in financial hot water. “It is probable, therefore, that the landlord and his attorneys will be unable to extract cash from the tenant.”

Strandvik says one of the lessons to be learned from all this is that credit, employment and character checking of tenants has to be intensely meticulous these days.

Rental agents will all too often not be as thorough in this process as they should be because they are under pressure from their landlord and their seniors to fill the premises, he says.

“We have known cases where a previous landlord testified that the tenant was reliable when this was not the case – he simply wanted to get rid of him.”

Had the agent checked with two or more previous landlords he would have discovered this, says Strandvik.

This is according to Jaco Rademeyer of Jaco Rademeyer Estates who says prior to the CPA, agents were, to a large extent, shielded from most aspects of the sale after the sales agreement had been signed. In the event of disputes between the buyer and seller, agents were, for the most part, merely regarded as “interested onlookers”.

This has now changed and agents are going to have to take far more responsibility and be far more accountable than before, he says.

Rademeyer believes that the CPA is going to rock the industry and agents who have not yet sought advice on how best to deal with the changes in the law urgently need to consult with an attorney or another professional body that specialises in, what is currently, a somewhat murky piece of legislation.

He says because the CPA has only recently been introduced into South African law, the legislation has yet to be tested in a court of law. “There appears to be a great amount of confusion as to what an agent can and cannot be held liable for, however, this is definitely a case of closing the stable door before the horse has bolted and there are ways for agents to protect themselves from potential lawsuits.”

The CPA, to large extent, he says is going to change the way agents operate. Securing a mandate for example is no longer just a matter of viewing a property and asking a seller to sign on the dotted line. The process that ordinarily took a couple of days to finalise can, if all the conditions of the CPA are met, take as long as a week to complete.

One of the objectives of the CPA is to ensure that the consumer understands the content of all the documentation required for the buying and selling of property. In other words, the mandate, sales agreement and any other documentation that is required has to be written in such a way that the average man with an average intelligence can fully understand the wording.

Another very important factor is the disclosure of information. It is imperative that agents insist that the seller make a comprehensive list of any faults on the property.

“Agents now need to put everything in writing and should ask the seller to document every fault that they are aware of.

“Every suspected and patent defect that the seller knows about must be acknowledged to the agent because in the event of a dispute the agent could be held responsible in terms of the CPA,” says Rademeyer.

He says this is because under the CPA a person who does not ordinarily make a living out of selling property will not be held accountable whereas an estate agent, who sells property for a living, will.

The fact that many agents will disagree with what appears to be a one-sided piece of legislation that has subjected them to new standards is immaterial and until a case is tested in court, agents are going to have to err on the side of caution, protecting themselves against every eventuality.

I would like to take this opportunity to firstly thank all of our staff for their dedication, loyalty, and commitment to our clients throughout this year. It has been a testing year of change, through the implementing of new systems and of new staff, and you have all pulled through amiably. The hard setup work put in this past year has already started to be felt where it is aimed, and that is in our service and satisfaction levels of our clients.

To our Trustees, I would like to say a very big thank you for your support and teamwork over this year. There is no doubt that a well-managed building with little stress for all parties’ lies in the willingness to work together, thank you. We commit ourselves to undertake all requests and instructions from yourselves speedily and accurately, and to advise and assist you on all decisions for your protection.

To our owners we would like to once again pledge our commitment to you and your investments for the ensuing year, and assure you that we will full-fill our duties and responsibilities in protecting your investments. We will uphold your credit control policies on arrear levies strictly, as implemented by yourselves at your AGM’s, and we will assist any owner or owners who’s rights are being withheld or infringed on by any Trustees.

For both Trustees and owners, is with great pleasure that I would like to announce that we will be moving to new corporate offices in Glen Anil during the shutdown. The move has been long overdue due to our growth over the past years, and is needed to accommodate our new service departments and lecture rooms, which you will be enjoying in the future. The new premises will be highly visible from the N2 and easily accessible from both the highway and Umhlanga rocks drive. We sincerely hope that this move will make it easier for all to make use of our “walk in – no appointment” policy for access to information and transparency

Our offices will close on the 15^th of December and will reopen on the 9^th of January, however our contact numbers remain the same as before and emergency numbers will be posted on the phone lines should there be any emergencies.

Enjoy the holidays and take care.

Kind Regards

Basil and Brandon Smit

brandon@uth.co.za