Termination

In a hypothetical scheme, some owners are unhappy with the quality of services provided by the managing agent. These owners want the managing agent removed and a different one appointed. Is this possible and if so, what do they have to do to achieve it? There are a number of alternatives, depending on the circumstances.

The managing agent is appointed by the trustees for a period of one year. The contract is automatically renewed from year to year unless the trustees give notice terminating the contract, in which case the contract terminates at the end of that year. The dissatisfied owners can inform the trustees of their dissatisfaction and hope that the trustees see their point and give notice of termination to the managing agent. If these owners can gather sufficient support from other owners, as the body corporate, they may instruct the trustees, at a general meeting, to give notice of termination and a different managing agent can be appointed once the existing contract has run its course.

If it turns out that the managing agent is in breach of some term of the contract or has done something or failed to do something that, in common law, would justify the termination of a contract between a master and servant, then the trustees need not wait, but can terminate the contract immediately. There must be a clause to this effect in managing agent contracts. Any owner is able to tell the trustees to terminate the managing agent’s contract in terms of this clause. However, if the owners do this, they must put up an amount decided on by the trustees as security, and they must indemnify the trustees and the body corporate against any costs or damages involved in the termination.

It is also possible for the owners concerned to lobby support from the rest of the owners, have a general meeting called and decide by special resolution that the managing agent’s contract be terminated immediately. In this case, the managing agent would be free to claim compensation and damages due to the breach of contract.

Anton Kelly is one of the Course Conveners of the University of Cape Town (Law@Work) Sectional Title Scheme Management course. Next course starts, 5 December 2011. For more information please go to www.paddocks.co.za or email Emma: emma@paddocks.co.za.