In the last two weeks I dealt with the budget that must be presented at the Annual General Meeting, as well as the Trustees duty to ensure that the books of account are audited annually.
I also reiterated the critical importance of a Body Corporate being run like a business. Remember that your home is probably the biggest investment you will ever make in your life!
It is the Trustees that ultimately bear the responsibility to ensure not only that the books of account of the Body Corporate are properly kept but also that they are audited.
This is one of the Trustees’ fiduciary duties – a duty of skill and care – to the members of the Body Corporate.
I mention this because the Trustees usually appoint a Managing Agent (in fact in my opinion they should appoint a professional and experienced Managing Agent) to provide a management service to the Body Corporate. Ask yourself the question: which company that deals with huge investments does not have professional people doing their books of account and the general management of their affairs – and are prepared to pay for it?
But whilst the Trustees can delegate the task of managing the scheme to an agent, they cannot delegate the responsibility to check that the managing agent is performing the task properly.
From a financial perspective this means that the Trustees must, amongst other things:
a) Ensure that the buildings comprising the scheme are insured to their full replacement valued at all times (MR29) even if though Managing Agent organises the insurance policy.
Management Rule 29 sets out the risks that the Body Corporate must be insured against.
It will be an absolute disaster if your unit burns down and the building is not insured. You will have no home yet still owe the bank the full amount outstanding on your bond.
b) Books of account must be kept on a monthly basis;
The Trustees must ensure that the Managing Agent presents them with bank statements and a full set of accounts on a monthly basis.
The Trustees must check the accounts and make sure that the Body Corporate’s expenses are being paid – municipal accounts, salaries and wages, PAYE, UIF, security services, and so on.
c) In the last few years there were some unscrupulous managing agents who ran joint Trust accounts (instead of having each building with its own bank account), who “stole” their client’s funds resulting in affected Bodies Corporate losing millions of Rands.
I cannot over emphasise the importance of ensuring that your managing agent is in possession of a current fidelity fund certificate from the Estate Agency Affairs Board (which means that your money is insured against the unfortunate eventuality of theft). This also means that the Managing Agent is a registered Estate Agent in terms of the Estate Agency Affairs Act.
It is also highly recommended that your agent is a member of NAMA (the National Association of Managing Agents) and therefore subscribes to their Code of Ethics and Code of Conduct.
PLEASE SEND YOUR QUESTIONS TO kbleijs@ibalaw.co.za I WILL MAKE EVERY EFFORT TO PUBLISH THE ANSWERS IN MY BLOG!
