Owners in a sectional title scheme are members of a community that has prescribed management structures, including the body corporate, the trustees and, often, a managing agent.
While most people know that the body corporate is made up of all the owners in the scheme and that the trustees are responsible for carrying out the statutory functions and decisions of the body corporate, there is a lot less certainty about the role of the managing agent, says Andrew Schaefer, managing director of national property management company Trafalgar.
“It is important to understand that the managing agent does not take over the responsibilities of the body corporate or trustees or make decisions for them regarding the financial management, administration, governance, payroll and statutory reporting obligations of their schemes.
“Our role is only to provide expert assistance and guidance and to help implement the trustees’ instructions.
“An agent is necessary as most owners and trustees are not property professionals and need qualified support to ensure good governance and effective communication. The importance of this becomes clear when one considers the value of the property involved and the lifestyle and financial implications for residents when a scheme is not well-managed.”
Schaefer says managing agents are generally appointed by majority vote at the scheme’s AGM and the full scope of their function should, thereafter, be set out in a management agreement signed by the trustees.
Some of the most important services provided by a managing agent include:
* Effective financial management and reporting: schemes with positive cash flow based on effective budgeting and good levy collections typically operate smoothly and meet the long-term expectations of residents. This begins with setting an accurate budget for each new financial year and determining the levies necessary to cover forecast expenses. However, the decision as to what the annual and/or monthly levies will be still rests with the owners, who will typically approve a recommended budget with or without amendment at an AGM.
* Levy collection: managing agents are generally also responsible for distributing owner’s levy invoices and the collection of levies and service charges.
Debt collection is also an important service component and managing agents are required to be registered with the Council for Debt Collectors and comply with the Debt Collector’s Act and code of conduct.
Owners who do not pay their levies place cash flow pressure on the body corporate and are subsidised by other owners, which is not a sustainable situation.
* Processing and accounting for approved creditor payments: this ensures that all property expenses, such as municipal accounts, insurance premiums and security and maintenance costs, are paid on time and that services to the scheme are not suspended.
* The maintenance of comprehensive financial records for audit purposes at the end of the financial year: managing agents arrange an audit process so that the body corporate’s AGM can be convened on time and conducted with the necessary supporting information. (The AGM must be convened within four months of the financial year end.)
* The compilation of annual tax returns: most managing agents have professional accounting teams to take care of the financial management elements of their agreements and provide trustees with monthly reports. These days, financial reports are typically also available online.
* Meeting administration: managing agents will usually send out notices for meetings, attend meetings and take minutes, convene general meetings with the necessary supporting information and ensure that all the important records of the property are securely archived.
* Payment of staff: managing agents usually manage the payroll, leave records, UIF and workmen’s compensation payments for staff employed by the body corporate.
They can also help with provident fund payments and human resources functions.
* Managing the upkeep of the scheme: consistent maintenance is important to ensure that the scheme is well-presented and that property values continue to increase.
Managing agents help with arranging quotes, scheduling approved maintenance activities and facilitating completion inspections and invoice payments.
* Overseeing health and safety compliance: this includes the annual firefighting equipment services, lift Annexure B inspections every two years and regular checks on emergency lighting, evacuation plans and emergency signage.
* Arranging the compilation of the 10-year maintenance plans and the insurance replacement valuation surveys every three years, as prescribed by the Sectional Title Schemes Management Act.