Sectional Titles

Management rules

Patrick Maybin discusses the amendments to management rules as per Government Notice No R1109 of 18 November 2005.
The amendments are mainly aimed at
1.1 ensuring better corporate governance
1.2 the monitoring of
(a) arrear levies
(b) arrear rates and services owing to a municipality.
The period for an agreement between a body corporate and its managing agent will be different.

The following amendments to the prescribed management rules were brought into effect from 18 November 2005:

Rule 36(2) has been clarified to make sure that the annual budget of a body corporate also provides for maintenance of common property.

Rule 36(2) now reads as follows (additions in bold)

The estimate of expenses referred to in subrule (1) shall include a reasonable provision for contingencies and the maintenance of the common property.

A new subrule 37(2) has been added to provide that specific information must be included in the annual financial statements of a body corporate. This is to ensure that arrear levies and amounts owing to the municipality are highlighted.

The new Rule 37(2) reads as follows

The financial statement shall include information and notes pertaining to the proper financial management by the body corporate, including:
(a) an analysis of the periods of debts and the amounts due in respect of levies, special levies and other contributions;
(b) an analysis of the periods and the amounts due, owing by the body corporate to the creditors and in particular to any public or local authority in respect of rates, taxes and charges for consumption or services, including but not limited to, water, electricity, gas, sewerage and refuse removal;
(c) the expiry dates of all insurance policies.

Rule 40 has been amended to provide that the annual financial statements must be signed by the auditor or accounting officer.

Rule 40 now reads as follows (additions in bold)

At the first general meeting and thereafter at every ensuing annual general meeting, the body corporate shall appoint an auditor to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting : Provided that where a scheme comprises less than 10 units, an accounting officer may be appointed for that purpose and the auditor or accounting officer, as the case may be, must sign the financial statements.

Rule 46(1) dealing with the managing agent's contract has been amended. Certain additional duties are placed on managing agents dealing with amounts owing to local authorities. It is also easier for mortgagees to insist on the appointment of a managing agent.

The rule now reads as follows (additions in bold and deletions in brackets):

Notwithstanding anything to the contrary contained in rule 28, and subject to the provisions of section 39(1) of the Act, the trustees may from time to time, and shall if required by a registered mortgagee of 25 [50] per cent of the units or by the members of the body corporate in a general meeting, appoint in terms of a written contract a managing agent to control, manage and administer the common property and the obligations to any public or local authority by the body corporate on behalf of the unit owners, and to exercise such powers and duties as may be entrusted to the managing agent, including the power to collect levies and to appoint a supervisor or caretaker : Provided that a managing agent shall be appointed for an initial period of one year and thereafter upon one month's written notice of termination of appointment by either party [a year at a time, and unless the body corporate notifies the managing agent to the contrary, such appointment will be automatically renewed from year to year. Further provided that if the agreement has not been reduced to writing within thirty days of conclusion, it shall be voidable at the instance of either party.]

Patrick Maybin

Reader Comments:

Russell Warner 23/03/2006:

This amendment will make it easier for a single bank to force the appointment of their preferred managing agent. It must be remembered that the developer is free to change the rules insofar as they are not in conflict with the Act. The question arises as to the applicablity of the new rules, which are really just "suggested" rules to existing schemes. It cannot simply be assumed that these rules apply accross the board.

Marilyn Mills 22/08/2006:

We have just discovered that 2 of our homeowners are in fact parters in our Managing Agent. We feel this is a conflict of interest as whilst they are paying levies, they are getting a much larger kickback in the fees the HOA is paying the Managing Agent. Is this ethical and is this a reason to cancel the Management Agreement?

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