Body corporate and trustees need to be in place fast

When a new sectional title scheme is complete, competent trustees, a management committee, legal advisors and managing agents need to be put in place fast.

Sectional title developments are now geared to be the fastest growing sector in the South African new residential property world, but on such schemes, says Tony Clarke, MD of Rawson Properties, there is always a crucial period when the developer hands over to the owners of the units.

Those owners are then required, by law, to form a body corporate and elect trustees.

Once these legally elected trustees are in place, said Clarke, they should, as quickly as possible, elect a management committee and ensure that they have legal counsel to advise them.

"Sectional title legislation and management are not learned overnight. It is almost always essential to call in those with legal expertise to ensure that the scheme performs in accordance with the law."

In addition, the committee should appoint a competent property management company or managing agent to guide them and, if necessary, to act as arbitrators between the trustees and the body corporate members.

Body corporate members, said Clarke, are often busy and inclined to take no interest in serving on the management committee themselves.

"It frequently happens that they show little interest in who is elected to the committee but this, too, can lead to disaster - a committee with inexperienced people and without a good managing agent will cause a scheme to lose value rapidly.

One of the trustee's primary tasks, said Clarke, - and members should see that they tackle it - is to draw up a budget. This will determine the cost of maintenance of the building in the year ahead but should also allow for sums to be collected on every levy so as to build reserve funds for major repairs and upgrades that will inevitably be needed down the line. If this fund is not set up, said Clarke, onerous special levies are almost certain to become necessary within the first three to six years of the project.

The new committee is also by law required to appoint a qualified, independent accountant/auditor for the scheme. This is necessary not only to audit the scheme’s financial accounts but also to draw up the end of year annual report for submission to and debate at the AGM.

Another very important task of the new committee, said Clarke, should be to ensure that the developers have made all the capital contributions required to the scheme and have met all their obligations, including those of dealing with the snag repair items.

"The developer is contracted to deal with these before 'walking away' from the scheme."

It is, said Clarke, a common experience to find that, as the developer has not been contacted quickly, he has moved onto another project and is "not available" for these tasks.

With the help of a competent engineer or building manager, the body corporate should therefore appoint someone to inspect the entire building within the first few weeks to see that there are no structural faults and that the developer is handing over the project in good order.

With a budget in place, said Clarke, a building can usually be maintained satisfactorily. However if the budget has been cut or not drawn up, within a period as short as three to six months the building can take on a shabby appearance. This, in turn, means that it will then begin attracting 'shabby' fly-by-night occupants.

"Every body corporate member should, therefore, try to be a trustee on his scheme or, at the very least, keep a close watch on those who are acting in this position on his behalf," said Clarke.

Posted at 02:10PM Feb 24, 2010 by Editor in Residential  |  Comments[1]