Where exactly is the problem?

I’ve heard this too many times. 

The block sucks.

The trustees are old and demented..

This managing agent is incompetent. 

I’ve been on both sides of the coin: having incompetent people managing a block where I am investing as well as being on a board of trustees and having severe issues with tenants and owners being aggressive. 

With this experience, I want to start off this article about who is actually at fault. We need to realise that nothing happens in a vacuum. People are involved. And the issue is not always the issue.

To break this down, let’s talk about potential problems:

  • The tenants are not happy with the block’s management. This could include noise levels, cleanliness, upkeep of the grounds and no one does anything about it
  • An owner is unhappy with work that was done on behalf of the body corporate 
  • The trustees and managing agents are not performing
  • The levies are too high
  • Owners are left in the dark about decisions that are made

The list with what could be causing the issues is endless. I would like to clarify some situations and what I have experienced, as well as looking at some processes that are in place in case you want to take it further. 

Case studies

The rude owner

We had a case earlier this year (2020) where an owner made it clear that the trustees are ‘old and should stand back’. He used rude language to express his anger and even added swear words as his bank references. The body corporate sought legal advice and warned him that if he did this again, we will start a case of crimen injuria and take legal action against slander.  

Thoughts on the rude owner

The body corporate and managing agent has the mandate to work for the betterment of the block. They have the interest of the block and all the owners at heart. They need to make sure that all is well managed and that the workplace is safe. As the owner, you might feel that it’s not what you’re expecting. In this case, there are some legal routes that you can take and can get access to paperwork that would enlighten you about what’s going on. 

Remember that few things can be achieved through being rude. There are other ways, for example:

  • If you, as the owner have questions about how certain things in the body corporate is handled, send them a letter with your questions
  • As an owner (not a tenant) have the right to attend a body corporate trustee meeting. You’re not allowed to vote, but you can see what they’re discussing. You also have a right to the notes.
    • Make sure you’re friendly and courteous. Don’t be nasty, or you will be asked to leave. Don’t fight – you can end up with a court case.
  • If you’re not happy with what they are doing, you need to raise this on the annual general meeting (AGM).
    • Remember that the owners collectively needs to make decisions on the sectional title scheme. They empower the trustees to do what they need to do. The trustees will give the managing agents the authority to do what they need to do.

Ousting the managing agent or trustees

In some cases such as the above, it might be needed to take action and understand the situation better. If you’re looking at ousting the managing agent, but the trustees are unwilling, you will need to jump through quite a few hoops. You cannot just oust them because you don’t like them. 

There needs to be valid, legal ground to oust them. You need the law on your side. Make sure you’re not petty – I see this a lot that people are just plain nasty for no reason. 

You need proper proof of gross mismanagement or gross misconduct. Follow the above points under the “thoughts of the rude owner”. This will help you to understand what the issues are. If they don’t answer your messages or they cannot answer your questions, then you would need to escalate the issue:
  • If the issue can wait for the AGM, then put it on the list of discussion points 72 hours before the meeting.
    • Note that in the AGM, generally speaking, all nominations for Trustees need to be in 24 hours before the meeting.
    • If you want to oust the managing agent, surface the issues with proof at the meeting. Let all the owners discuss this together. 
    • Managing a sectional title scheme is a group effort. Everyone should agree that something is an issue and that it should be addressed.
  •  If the issue cannot wait for the AGM, then get 66.6 % of the owner’s signatures and get order an emergency meeting. You can oust the trustees or managing agent in these meetings.
  • If the trustees are not responding, you can seek legal advice and get a court order to oust the trustees and managing agent. I personally have not seen one block doing this successfully, but it is possible!

The incompetent managing agent

I had a friend who bought a place in a very nice up and coming sectional title scheme. He paid about R 1 500 in levies, which was well priced. The odd thing is that the managing agent didn’t want to schedule an AGM. 

After the trustees/owners forced the managing agent to hold an AGM, it surfaced that there was a water leak now for three months, costing the body corporate R 500 000 per month, that the managing agent gladly handed over to the municipality. 

The scheme had no more money in the emergency fund left. 

When questioned about this, the managing agent representative got up and left. 

The managing agent is empowered by the trustees to manage the block. The above is gross mismanagement. In the above scenario, there is a court case pending about gross mismanagement and I am looking forward to the outcome. 

Thoughts on the incompetent managing agent

It is essential that the owners/managing agents/staff communicate to the trustees through the channels set up so that they can be made aware of what is going on. 

  • Complain about the things that’s worth complaining about: I have historically also heard owners complain about they way pots are being painted it how Mr Espresso from down the hall made a rude hand gesture towards them – this is not of the concern of the trustees and needs to be handled between the people themselves.
  • In some scenarios, things happen without the knowledge of the trustees. The trustees give the managing agent the right to handle some things on their behalf. If needed, send a letter through the given means to ask for clarity about why certain things are done.
  • It’s a legal requirement to have a maintenance plan and emergency fund for all sectional title properties. 
  • The body corporate should take legal action against illegal activities. 
  • If the managing agent is incompetent, then the trustees should practice their legal right (as the body that employed them) and/or this needs to be handled at the AGM. 

The licentious caretaker

I’ve been in the situation where the caretaker would do certain things that made the management of the block exceptionally difficult:

  • He took long breaks from work, such as travel to his girlfriend during work hours.
  • Lightbulbs were bought at 3 times the price and did not follow proper procedures when doing procurement.
  • He was unreachable during work hours. 

Thoughts on the licentious caretaker​

The board of trustees employ people to move the block forward. This means that the cleaners, caretaker and gardeners are employees of the body corporate. As with any employee-employer relationship, the terms should be clearly defined:

  • Each employee should have a job specification, i.e. what is expected from them
    • Salary, bonuses (if any), leave days and availability should be set out in this document
  • As with any employee, if there are issues, the employer (which is the trustees that the body corporate empowered to make the decisions) should address them. This might mean written and verbal warnings followed by dismissal for qualifying offences.
  •  If one cannot prove the allegations, it is important to get proof, as some cases do escalate to the CCMA.
  • The trustees and managing agent should defend all staff members against abuse and bad behaviour towards them. Yet, the caretaker should still do his job such as addressing owners and tenants that break the house rules.

It's everybody's fault

I have noticed that no one wants to take the blame when something goes wrong.

The body corporate will always blame the tenants and the tenants will always blame the trustees.

When the levies go up, it would always be because of bad management. And sometimes it is. But sometimes costs do go up.

As a collective scheme, everyone needs to work together. It is thus important to join with everyone else into making your a investment good one.

Conclusion

In some cases, you need to take legal action. In my personal experience, it’s better to settle the matter out of court – which is 100% possible.  

The trustees need to be involved in their investments. 

The owners need to take responsibility and help the caretaker by adhering to the house rules.

Managing agents need to take the trustees and owners seriously. They need to manage the block well.

Happy investing!

Sources consulted


Money Local

Frugal Local runs his own company (Effectify). He does software development and helps small businesses and startups with digital solutions. He enjoys writing articles and simplifying complex things - such as the article you're reading!