Should managing estate agents have a contract in place from the trustees?

When it comes to the management of a sectional title scheme, the majority of trustees will do an excellent job, but it sometimes makes sense to employ a managing agent to take care of what could be seen as a very time-consuming job.

Trustees do not get paid for the hours that they put into managing their scheme and often have to fit the necessary tasks into an already busy work schedule, whereas managing agents do this work only and are experienced in dealing with all sectional title matters.

If trustees do decide to employ a managing agent, they must ensure that they have written contract stating all the conditions of the appointment.

Prescribed management rules 46 and 47 deal with the appointment of a managing agent, and the cancellation of the contract. These rules deal with the authority to employ an agent, and it is up to the trustees to ensure that the contract complies with the PMR.

The contract drawn up should include:

• Term of the contract: PMR 46 says that a managing agent’s contract must run for one year and is renewed automatically unless the body corporate notifies him otherwise. There is no notice period specified and the trustees must ensure that this is included in the contract.

• Cancellation: the contract should include the provision to cancel the contract without notice if the managing agent is found to be non-performing of his duties or is in breach of the terms of the contract. The condition should state that he will have no claim against the body corporate should there be a cancellation.

• Revocation: there are three sets of circumstances whereby the contract could be revoked – liquidation or business rescue of the managing agent or his company; if he or any member of his staff have been found to have been convicted of an offense or involved in fraud of any kind; or if the body corporate has taken a special resolution to revoke the appointment. In the last case, however, the managing agent could claim compensation or damages for loss of income.

Before deciding to appoint a managing agent, trustees should ascertain specifically what it is they want the managing agent to take care of. These tasks should be clearly listed in the contract. These duties could include preparing the annual budget; preparing a schedule of insurance for the scheme; dealing with insurance claims; maintaining the common property; accounting and payment of accounts; minutes of meetings and notices to owners; dealing with complaints from owners, and enforcing rules of the scheme.

The key to a successful relationship is to find a good managing agent, one with contactable references and a good track record. The benefits will be that the administration and management work will be done by a professional in this field and by someone who only does this work. In turn, the performance of the body corporate should improve and the financial situation of the scheme will remain healthy.