Sectional Title update … trustees, keep a close eye on managing agents

By: Intasure | 9 January 2020 Share:

This from Seef Southern Suburbs

This month we thought we would highlight the fiduciary responsibility of the trustees when appointing managing agents to assist with the management and administration of a sectional title scheme.

An interesting question arises should a body corporate member suffer a financial loss due to for example an averaged or refuted claim as a result of under-insurance of the buildings in the scheme. The owner would then be likely to seek alternative ways to recover the shortfall.

By law, the trustees are the elected representatives of the body of owners in a sectional title scheme and are entrusted with the scheme’s financial and maintenance management, setting up funds for upkeep, record-keeping and promoting an understanding of the rules among owners, in good faith and with the scheme’s best interest in mind.

The duties that they perform are prescribed by law and binding on them to the extent that they are placed in a fiduciary position vis-à-vis the body of owners. This implies a high level of responsibility and accountability. The above insurance short-fall scenario could therefore open trustees to claims if they did not perform their duties in the way required.

The duties of the managing agent are generally set out in a service agreement entered between the trustees and the managing agent and any duty not tasked to the managing agent remains with the trustees.

While the managing agent must act in good faith at all times, it remains the trustees’ responsibility to liaise closely with the managing agent to make sure all tasks are properly attended to. The primary fiduciary responsibility remains with the trustees and it is therefore essential that trustees ensure that they are aware of their duties and obligations. They should also monitor and take a keen interest in the management of the scheme by the managing agents to minimise risks wherever possible.

Investing in sectional title property is a little more complex compared to freehold property, largely as it is regularly by its own unique laws and regulations which apply to sectional schemes. Existing property owners and prospective buyers should always ensure that they understand how sectional title differs from freehold and that they have a full set of guidelines pertaining to the particular scheme.

With thanks to Gina Meintjes of Seef Southern Suburbs

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