Sectional title: make your managing agent pay

Can you imagine handing over your salary every month to a virtual stranger in order for them to manage your finances and pay your bills? In essence this is what body corporates do when they entrust the affairs of their sectional title scheme to a managing agent.

Don’t get us wrong and assume for one minute that we are suggesting that you ditch your managing agent and go it alone. But, given a recent incident in which a managing agent defrauded a sectional title scheme to the tune of R1.2-million, we strongly recommend that you keep close tabs on your scheme’s affairs.

Eish!

The owners of the Motani complex in Gauteng religiously paid monies over to its managing agent for lights and water. The lights stayed on and the water was never disconnected and all seemed to be in order. However, it became clear that there was a major problem when a new management agent took over and discovered that the previous agent and a corrupt City Power official had been cooking the books for four years. In a nutshell, it was discovered that the complex owners owed R644 000 for electricity and around R574 000 for water. Although arrangements have been made to repay the money by way of a special levy, you have to ask whether the fraud would have happened in the first place if the body corporate kept a closer eye on things.

Fraud and corruption are rife in this country and as such it is imperative to find a managing agent that is going to be open and honest and actually do what it is paid to do by keeping the books in order.

But how?

So how do you go about finding the “perfect” managing agent?

By law, managing agents have to be registered with the Estate Agency Affairs Board (EAAB), be in possession of a valid Fidelity Fund certificate, and have a trust account. It’s important to note that trust accounts have to be audited once a year and the audit results submitted to the EAAB in order for agents to receive their Fidelity Fund certificates for the forthcoming year.

Unfortunately, it appears that, while all agents have to operate a trust account, some (one can only assume those who want to avoid the audit process) try to fly under the radar by placing money in a business or personal account. Many managing agents who don’t operate a trust account will point out that that they (or the company they work for) has indemnity insurance that would pay out if something went wrong. However, the question has to be asked; will this insurance pay out if the agent concerned is working illegally by failing to abide by the EAAB’s code of conduct? In other words, this practice should start alarm bells ringing and anyone who is paying money into a managing agent’s account should insist that this be a trust account.

This is ideal

Most reputable agents also belong to the National Association of Managing Agents (NAMA). While this is not a legal requirement, it is recommended that anyone considering using the services of a managing agent ensures that the latter is registered with this highly-regarded body.

Managing agents generally manage more than one sectional title scheme. Ask for a list of the schemes the agent already administers and randomly call a few in order to ascertain how well the schemes are being managed.

It is vital to keep tabs on matters once a managing agent has been appointed. The chairman of the scheme should, as a matter of course, ask to receive a full age analysis that provides proof that payments have been made to the correct, relative service providers. Remember that managing agents will automatically have access to the body corporates’ bank accounts and could transfer money, without anyone knowing, at any time.

With this in mind, it may be an idea to contact the municipality and other service providers from time to time to double check that the accounts have indeed been paid.

If possible, get involved in the running of your body corporate and attend body corporate meetings. Do not allow yourself to be intimidated or fobbed off if you believe something is awry. If necessary, ask to see evidence that things are being done correctly.