The ride for Managing Agents is pretty bumpy the world over.
In this article, I discuss the top three legal challenges facing Managing Agents.
Hazel Easthope, associate Professor at the University of New South Wales, in her book, “The Politics and Practices of Apartment Living”, submits that across the world owners, experience high levels of dissatisfaction with Managing Agents. In her research undertaken in New South Wales, Singapore, The United States, Dubai, England and South Africa, it is quite apparent that Portfolio Managers face substantially the same challenges and run into similar impasses when it comes to pleasing all the Trustees and owners all of the time. A comforting thought really. Those of us working in this industry understand its vagaries. One day you are the flavour of the month, the next, you are not. Low profit margins, demanding clients, pressure to regulate and the race towards who can provide a better offering in the technology space are all elements conspiring to make the ride for Managing Agents pretty bumpy the world over.
The first legal challenge which I feel is important to delve into is the Managing Agents’ understanding of Management and Conduct Rules. The life of the portfolio manager can be made that much easier where the rules of a scheme are drafted cleverly, where all the clauses are legal, robust and enforceable. Where the rules have not been updated for years and take naught into consideration around what is Constitutional and what is not, I fear that legal attacks by more knowledgeable and often litigious owners become increasingly common, aggressive and tremendously draining on both Trustees and Managing Agents. A Managing Agent, should, with great ease be able to advise the Trustees to amend their rules in order to breeze through successfully obtaining a compliance certificate from the Community Schemes Ombud Service. Without hesitation, they should know that discriminatory rules in schemes cannot be brooked and that illegal rules such as switching off electricity or restricting services for unpaid levies will not be allowed. If they are up to speed with the latest news on short-term letting, the scheme’s representatives will be able to decide on their policy around their rules on the subject. Many complaints come through to the agents where penalties have been imposed on an owner without the rules being correctly drafted to facilitate such a clause. If there is no right to be heard in the clause, it can and will be struck out by any competent judge or adjudicator, with the Body Corporate having to bear the costs. Prohibiting ritual slaughter on common property in a rule’s clause will also be struck out by the Ombud. It can be agreed by all of us that it would be so much easier if the Managing Agent knew these things. Time and money would be happily saved without schlepping up and down to Court or to the Ombud to interpret invalid rules.
The second legal challenge for Managing Agents to grapple with is making the jump to more streamlined technological platforms which can yield popular online Special and Annual general meetings. We have been pushed by a world pandemic, some of us kicking and screaming, into a different era where nothing will ever be the same again. Management Rule 17(10) specifically authorises online video conferencing as long as everyone has access to the platform. The real challenge, apart from convincing older residents stuck to the “in person” idea is to be right “up there” in making the full experience of online meetings unthreatening and pleasant for all owners. Those Managing Agents who have succeeded in this regard tell me with great glee of how they will never return to the late evening meetings at the clubhouse. Why would they? Their portfolio managers can stay at home and be with their families rather than traipsing around at night, putting up with traffic and petrol costs. Quorums are easier to obtain and meetings can be controlled more easily, placing annoying people intermittently on mute. The meetings can be recorded and service providers can zoom in and out to report on key issues. Voting online has proven to be trickier, but nothing that a specialist App cannot deal with.
The last, but certainly not the least legal challenge for the intrepid Managing Agent would be controlling the often” spiralling out of control” levy roll. Obviously, if too many owners fall into arrears in their complex, it becomes easy for the scheme to devalue. There will be less frequent maintenance effected, the calibre of staff and services will deteriorate and the banks will place the building on the radar (in a bad way) when looking at granting bonds for prospective purchasers. If that bad debt is too high, you can be sure that the Managing Agent’s services will be the first to be terminated. So, to be practical and proactive, the fundamentals should be revised by the agent. Managing a building is no different to managing a business. Tight credit controls are crucial. Get the basics right. Keep the Trustees’ resolution on the agreed levy (which resolution should be taken directly after every Annual General Meeting) in a safe place together with the resolution on interest. Encourage the Trustees to budget for legal expenses and to tax bills of cost where they have incurred legal fees so that they can recover a high percentage of those fees from the recalcitrant owner. Hand over a debtor quickly in order to strike while the iron is hot, but be cognisant of CSOS directives allowing people adversely affected by the Covid-19 pandemic to make monthly payment arrangements.
Above all, in my experience if a Managing Agent retains a high level of integrity and is supportive of the Trustees by going the extra mile to provide guidance and education, they will retain the portfolio of buildings which is reflective of their superior business ethos.
Director, BBM Law