Introduction

In my last article I addressed the appointment of the executive managing agent in light of a recent webinar hosted by Fitzanne Estates on the Community Schemes Ombud Service (“CSOS”) executive managing agent panel. In this article I will address the role of the executive managing agent, and the qualifications, skills and experience required to execute the role.

What does the legislation say?

PMR 28(3) states that an executive managing agent:

1. Is subject to all the duties and obligations of a trustee under the Act and the rules of the scheme;
2. Is obliged to manage the scheme with the required professional level of skill and care;
3. Is liable for any loss suffered by the body corporate as a result of not applying such skill and care;
4. Has a fiduciary obligation to every member of the body corporate;
5. Must arrange for the inspection of the common property at least every six months; and
6. Must report at least every four months to every member of the body corporate on the administration of the scheme.

PMR 28(4) sets out the required content of the abovementioned reports and states that the reports of an executive managing agent referred to in PMR 28(3)(f) must include at least the following details:

1. Proposed repairs to and maintenance of the common property and assets of the body corporate within the next four months;
2. Matters the executive managing agent considers relevant to the condition of the common property and the assets of the body corporate;
3. The balance of each of the administrative and reserve funds of the body corporate on the date of the report and a reconciliation statement for each fund; and
4. For the period since the appointment of the executive managing agent or from the date of the last report:

1. The expenses of the body corporate, including repair, maintenance and replacement costs; and
2. A brief description of the date and nature of all decisions made by the executive managing agent.

What is the difference between the executive managing agent and a normal managing agent?

The executive managing agent is appointed to perform the functions and exercise the powers that would otherwise be performed and exercised by the trustees. The executive managing agent is subject to all the duties and obligations of a trustee in terms of the Sectional Titles Schemes Management Act 8 of 2011 (the “STSM Act”) and the rules of the scheme. A normal managing agent is only appointed to perform specified financial, secretarial, administrative or other management services under the supervision of the trustees in terms of a contract.

In short, the main difference is that the executive managing agent stands in a fiduciary relationship towards the body corporate, in the same way that the trustees would, while a normal managing agent stands in a contractual relationship towards the body corporate, and is still under the supervision of the trustees who maintain their fiduciary obligation to the body corporate.

What qualifications, skills and experience is required to be an executive managing agent?

From the above legislative provisions it is clear that executive managing agent is required to execute various managerial, secretarial, financial and physical responsibilities toward the body corporate.

Hendrik Hoffmann, the Managing Director of Rise Property Solutions, made the point in the podcast that being an executive managing agent is a specialized position, especially since they are compared to administrators. Executive managing agents would need so much more than just sectional title knowledge, including financial acumen, problem solving skills, and business management skills. He questioned what the process was for appointing the panel of executive managing agents and ensuring that they are properly qualified to take up the position. Specifically he questioned whether they were interviewed, and their previous clients consulted, and what training was specifically done?

Johlene Wasserman, the Manager of Governance, Compliance & Enforcement for the CSOS responded by saying that the CSOS placed an advert for written submissions, and on the advert they required the following information and documents:

• A valid fidelity fund certificate for managing agency company and the principal member;
• level one or two BBBEE certificate;
• professional indemnity cover;
• fidelity cover;
• a company portfolio as well as the resume of the principal member needed to be attached.

That criteria was considered extensively to see whether the candidates were qualified or not, with a focus on transformation balanced with having a suitably qualified panel.

The panel of fourteen were then trained on the CSOS Code of Conduct, as well as what their duties, rights and responsibilities are toward the body corporate. The CSOS also drafted and made available an optional service level agreement for the executive managing agent to make use of with the client (the body corporate) if they so wish. The CSOS further stated they are committed to continue to engage with the panelists to ensure that they continue to give the clients excellent service.

Conclusion

When selecting an executive managing agent to take over all the powers and functions of the trustees, the body corporate should ensure that the candidate fulfills at least the abovementioned criteria for application. In my view, the trust that is placed in the executive managing agent to manage the scheme is the most important consideration. The body corporate should apply their minds to the process of appointment. Previous and existing clients of the executive managing agent should be consulted to establish whether the executive managing agent has the required level of expertise and experience to take over the executive role of managing the scheme (and each member of the body corporate’s) financial investment.