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.
However, 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 executing 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, MD of national property management company Trafalgar.
“To start with, though, 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 with regard to the financial management, administration, governance, payroll and statutory reporting obligations of their ST schemes. Our role is only to provide expert assistance and guidance and to help implement the instructions of the Trustees.
“It is necessitated by the fact that most owners and trustees are not property professionals, and need qualified support to ensure good governance and effective communication in their schemes. The importance of this becomes evident when one considers the value of the property assets involved and the lifestyle and financial implications for residents when a scheme is not well-managed.”
Managing agents are generally appointed, he says, by majority vote at the AGM of a ST scheme, and the full scope of their function should thereafter be set out in a management agreement that is signed by the trustees and functions as a service level agreement.
Some of the most important services provided by a managing agent include:
- Effective financial management and reporting. ST schemes with positive cash flow based on effective budgeting and good levy collections typically operate smoothly and meet the expectations of residents in the long term. 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 / 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 in line with the budget and associated levy schedule agreed at the AGM. 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 provided to the scheme are not interrupted or suspended.
- The maintenance of comprehensive financial records for audit purposes at the end of the financial year. We facilitate a time and cost-effective audit process so that the AGM of the body corporate can be convened on time and conducted with the necessary supporting information. (The AGM must be convened within 4 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 comprehensive 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 employed staff. Managing agents usually manage the payroll, leave records, UIF and workmen’s compensation payments for staff employed by the body corporate. We can also assist with provident fund payments and HR support such as CCMA hearings.
- Managing the upkeep of the scheme. Consistent maintenance is important in order to ensure that the scheme is well-presented and that property values continue to increase, and the role of managing agents in this regard is to assist with arranging quotes, scheduling approved maintenance activities and facilitating completion inspections and invoice payments. Trafalgar offers a caretaker service for buildings that do not have resident trustees or their own caretakers to regularly inspect the common property and to identify maintenance which needs to be done.
- Overseeing health and safety compliance such as 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 (STSMA).