Putting a Community Scheme under sectional title administration is not a decision to be taken lightly. The implication of putting a scheme under administration is that an external 3rd party will be in total control of the financial and administrative running of the scheme and ultimately restore the well-being and financial stability of the Body Corporate and the owners.
Sometimes there is no other choice but to put a scheme under administration. Here is a list of the main reasons why a scheme should be put under administration:
In-fighting between owners
In many cases, the in-fighting between owners of a sectional title scheme has become so bad that there is no other option than to hand over the management of the scheme to an external party. The external administrator oftentimes becomes the mediator in the scheme and has the necessary skill set to resolve these disputes in an appropriate manner.
Financial instability
Financial instability is one of the biggest problems in Community Schemes in South Africa. From non-paying owners to mismanagement of funds, there are a whole host of reasons that a scheme’s finances could be mismanaged by its owners, trustees, or external parties. When a scheme experiences financial mismanagement, there are far-reaching consequences for the owners, tenants, and external parties (such as managing agents, municipalities, etc.). When a scheme is unable to pay for the electricity, for example, to keep the electricity on, the value of the property declines rapidly putting the owner’s livelihood at risk.
Mismanagement and lack of compliance
Mismanagement doesn’t always involve the finances of a scheme. Sometimes it involves the mismanagement of the complex in terms of the adherence to Sectional Title Laws as well as the recording of documentation. The Sectional Title Schemes Management Act states very specifically how different decisions must be taken by a Body Corporate and it is vital that a Scheme follows these to ensure complete compliance with the STSMA and all other relevant laws at all times.
The scheme is unable for any reason to appoint Trustees
Schemes that have trouble appointing or keeping trustees on the board are at risk of running into maladministration. The trustees and chairperson are the driving force for the scheme and without them, there is usually a lack of forward momentum which causes mismanagement. The owners are ultimately responsible for their own investment in a sectional title scheme and if they are unwilling or unable to come together to form a group of trustees, then there are more serious issues that need to be addressed. These issues can be resolved by the administrator who will be the representative of all owners and who will act as the trustees and managing body.
As explained above, there are various issues that can cause the collapse of a sectional title scheme. The reasons listed above are just the most likely reasons for a scheme to be put under administration until such a time when the scheme is rehabilitated and in a better financial and/or compliant position where the owners can again resume the management of their scheme and ultimately their investment.
If you are struggling with your scheme and are experiencing similar issues, do not hesitate to contact Confiance Administrative Solutions today for an obligation-free assessment of your scheme.
