Fairvest In Cape

FAIRVEST Property, the listed real estate company that is headquartered in Central Cape Town, strangely holds no significant investments in the city. What’s more, the property managers, Blend Property, who are responsible for managing Fairvest’s portfolio are also based in Cape Town. … Continue reading →

Top Cape property group expands capacity to service market needs

De La Porte drives new property management growth surge. Significant organic growth in the De La Porte Property Group’s management service – which is attracting clients to its breakthrough industry-specific systems and software – has prompted the Group to add … Continue reading →

Sectional title trouble in paradise

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sectional title managers converged for an Estate Agency Affairs Board (EAAB) update on the money paid to CSTM for municipal bills. “I didn’t expect that much anger at that meeting,” says Cindy Nicholls, of Pasco Risk Management, who delivered an update to stake­holders at the request of the EAAB. Nicholls and her team were assigned to figure out how CSTM CEO Quinton Brown managed to allegedly get his hands on trust fund monies. Continue reading →

Twin body corporate

The owners in the scheme known as Twin Oaks do not get along. Trouble is, the entire body corporate is now at loggerheads. Yes, 50% of the owners are pitted against the other 50% in disputes and unpleasantness. How come? … Continue reading →

Termination of a managing agent’s contract

In a hypothetical scheme, some owners are unhappy with the quality of services provided by the managing agent. These owners want the managing agent removed and a different one appointed. Is this possible and if so, what do they have to do … Continue reading →

Amending sectional title conduct rules

Trustees of sectional title schemes need to be fully aware of the procedures they should follow when amending conduct rules. Michael Bauer, general manager of property management company IHFM, says that he frequently comes across cases where trustees and/or their … Continue reading →

Liquidation of Constantia Sectional Title Management

LIQUIDATION: THE BODY CORPORATE OF QUINN CENTRE // CONSTANTIA SECTIONAL TITLE MANAGEMENT. We refer to the above matter and write this letter on instruction of Lexstar Trustees CC. On 24 May 2011 the Body Corporate succeeded with their urgent liquidation … Continue reading →

Advice to trustees hit by the CSTM demise

sectional-title-property-fraud Continue reading →

SECTIONAL TITLE TRUSTEES ARE DUTY BOUND TO DIGEST SECTIONAL TITLES ACT LEGISLATION

Every member of a body corporate, but most especially its trustees, must ensure that they are familiar with the provisions of the Sectional Titles Act 95 of 1986 and the management rules which regulate the affairs of the body corporate.

Sectional title schemes are managed, controlled and administered by the body corporate, the members of which are all owners of units in the scheme.  A unit is a section, which is one’s apartment/duplex/simplex, together with an undivided share in the common property in the scheme.

The functions and powers of the body corporate are performed and exercised by a small representative group of owners in the scheme who are appointed by the owners as trustees of the scheme to manage the day-to-day running of the scheme on behalf of the body corporate.

The trustees are empowered to exercise all the powers and to perform all the duties of the body corporate within the limitations imposed in the Sectional Titles Act and the management rules of the scheme and subject to any restrictions imposed on the trustees at a general meeting of the owners. 

Contrary to popular opinion that it is the trustees who have an unfettered right to lay down the law in a scheme, it is the owners in a general meeting who have the ultimate decision-making power in a scheme.

The function of the owners in a general meeting is legislative while the trustees have an executive and administrative function, namely, to ensure the day-to-day management of the scheme.

Some of the limitations on the powers of trustees imposed by the Act are as follows:

• Trustees may not sell or let common property without the consent of the body corporate, which consent must be obtained by way of a unanimous resolution. A unanimous resolution must be passed by all the members of a body corporate at a general meeting at which at least 80% of all the members of a body corporate (in number and in value) are present or represented.

• The trustees are empowered to exercise all the powers and to perform all the duties of the body corporate subject to any restrictions imposed on the trustees at a general meeting.  An example of such a restriction is the prohibition of expenditure over a specified amount by the trustees without the consent of the owners. The power of the owners to limit the powers of the trustees is an important power that should not be exercised so as to hinder the trustees in the performance of their duties but should instead be exercised so as to operate as an effective mechanism of control over the decisions of the trustees.

The Sectional Titles Regulations prescribe a model set of management rules which regulates the management and administration of a scheme and which sets out the powers and responsibilities of the trustees.

The management rules may be added to, amended or repealed by unanimous resolution of the body corporate.

Some of the limitations on the powers of trustees imposed by the management rules are:

• Trustees may effect improvements of a luxurious nature – the installation of a pool, for instance – on the common property only if the owners agree to such improvements by way of a unanimous resolution.

• Should the trustees wish to effect improvements of a non-luxurious nature on the common property, such as the erection of a security gate, the trustees are required to first give written notice of their intention to all owners. The trustees must at the written request of any owner convene a special general meeting in order to deliberate upon the proposed improvement, at which meeting the owners may veto, amend or approve the proposals by way of special resolution.

Each trustee stands in a fiduciary relationship to the body corporate. In terms of the Act, this relationship demands that a trustee must act honestly and in good faith towards the body corporate, must not exceed the powers granted to him by the Act, the management rules and the owners at a general meeting, and must exercise his powers in the interest and for the benefit of the body corporate.

A trustee must avoid any material conflict between his own interests and those of the body corporate. In particular, he must not, by reason of his office as a trustee, derive any personal benefit to which he is not entitled from the body corporate or from any other person in circumstances in which that benefit is obtained in conflict with the interests of the body corporate.

He is furthermore obliged to notify all other trustees of the nature and extent of any direct or indirect material interest he may have in any contract entered into by the body corporate.

If a trustee breaches his fiduciary duties by an act or omission that is grossly negligent or performed in bad faith, he will be liable to the body corporate for any resultant loss suffered by the body corporate or any economic benefit derived by the trustee.

Where a trustee has not disclosed the nature and extent of any direct or indirect interest in a contract concluded by the trustees on behalf of the body corporate, that contract is voidable at the option of the body corporate.

From the viewpoint of a trustee of a large body corporate from which a significant number of complaints and issues arise on a weekly basis, it is often tempting to do what the reasonable person would consider is reasonable in the circumstances without resort to the Act or the management rules.

Yet doing so would constitute a breach of the trustees’ fiduciary duties to the body corporate. It is imperative that all members of a body corporate, but most especially its trustees, are familiar with the provisions of the Act and the management rules relevant to the powers, duties and liabilities of trustees.

Experience shows that it is ignorance of the Act and the rules that precipitates the largest number of conflicts among the trustees themselves, and between the trustees and the members of the body corporate.

Nadisha Singh is an associate in the corporate department of Bowman Gilfillan, Cape Town

HOAs and Sectional Title schemes are not the same

There seems to be some confusion of late as to the differences between home owners’ associations (HOAs) and sectional title schemes.

Sectional title is a legal arrangement in terms of which parts of buildings can be exclusively owned, in conjunction with shared ownership of other parts of the buildings and the land.

The fundamental concept that underlies this type of title is an abstract division of buildings into some parts that are owned in undivided shares by all participants (referred to as “common property”) and other parts that are exclusively owned (referred to as “sections”).

The Sectional Titles Act, a national statute that applies to the formation and operations of all sectional title developments, also makes provision for “exclusive use rights” in terms of which the owner of a section, who is also the co-owner of all the scheme’s common property, may enjoy the benefits of an arrangement with the other co-owners that s/he alone will have the right to use a specified part of the common property.

HOA developments, by contrast, operate on the basis of a combination of direct and indirect conventional ownership. There is no special type of title involved and no national statute that specifically regulates their formation or operations, although the Companies Act applies to those HOAs that are formed as non-profit companies.

In an HOA development, each owner obtains registered title to a conventional property held under a title deed and described on a registered diagram or general plan (“kaart en transport”) as with any other conventional land in a South African township.

But in addition, each owner of an individual property in an HOA development is automatically a member of the HOA that is usually the registered owner of the development infrastructure. In this case, each owner has indirect rights to the HOA’s property as well as the other rights and obligations that are associated with that membership.

HOAs are one of the biggest and fastest growing sectors of the South African property market. There is a considerable need for Knowledgeable managers for these associations, and thus HOA management can be a lucrative niche for property managers.

Rob Paddock is the operations director for Paddocks. Feel free to visit the website atwww.paddocks.co.za or for free sectional title advice go to www.sto.co.za

Total Deviation

I think that the discussion regarding the above now seems to have deviated totally from the original question. The latest response from Dudley Lee (Three aspects response goes down another road altogether. The question as to whether the arrears are preferent or concurrent is not really at issue. To the best of my knowledge there has already been a High Court judgment in this respect and I am of the opinion that where a body corporate, in a sectional title scheme, which body corporate has been established by law, is involved, the matter is certainly different to where an HOA is involved. I have yet to come across an HOA that is established in terms of a Law.

The question is as to whether the Registrar’s conference was correct in issuing the original resolution and then whether the Chief Registrar was correct in withdrawing that resolution. I think it is important to consider the reason for such a condition, requiring a consent, being inserted in the title deed. Such a condition is inserted either at the instance of the developer or as a condition for the approval of the subdivision by the local authority. The reason for such a condition is to ensure that the complex itself will be properly regulated and maintained. The only way that the HOA can claim contributions from owners is on a contractual basis and this is established by insisting upon a contract being entered into before a certificate is issued and therefore before transfer is registered. If transfer is registered without such a certificate, the HOA would find it very difficult to recover future levies from an owner and would not be able to finance the maintenance of the complex. This would lead to a reduction in the values of properties in the complex and would also lead to financial institutions refusing to grant loans for the purchase of properties in such a complex. One can to some extent use the analogy of the supply of services by the local authority to an owner of a property. The local authority insists that the owner pays a deposit and signs a contract, before the local authority supplies services. The same applies with the HOA.

I am of the opinion that if the Registrar allows the transfer to proceed without such a certificate, and the HOA suffers a loss as a result, the HOA may have a claim for damages against the Registrar. The damages would not relate to outstanding amounts prior to transfer but would relate to loss of income to the HOA after transfer. It is even possible that owners could claim damages from the Registrar if they felt that the value of their property had been reduced as a result of the failure of the Registrar to insist upon a certificate in terms of the condition in the title deed.

There is no doubt whatsoever in my mind that the Chief Registrar was correct in withdrawing the conference resolution.

Kevin Mahon
Attorney, Notary and Conveyancer
JB HUGO & CRONJE INC
kevinmahon@hugocronje.co.za

Source: http://www.ghostdigest.co.za

Wesgro Rings Bell For Massive Investment

The Western Cape Investment and Trade and Promotion Agency (Wesgro) has secured a R77-million investment with German printing company Rako Labels, a new printing enterprise in Cape Town.

Wesgro Investment Promotion Manager Dinesh Harry negotiated the Rako investment on behalf of Wesgro.

The investment would create about 35 jobs in Capricorn Park in the southern Peninsula. The Capricorn Business Park is near Muizenberg and the economically depressed neighbourhoods of Lavender Hill and Hillview.

Bögl said he loved South Africa and was honoured to be able to assist in the skills development of his staff through the investment.

This investment into South Africa is part of a global strategy by Rako Labels to set up a presence in key growing markets.

Source: Cape Business News http://www.cbn.co.za

Trematon Spearheads New Venture

CAPE TOWN-based investment company Trematon Capital Investments has broadened its property portfolio by acquiring a 50% stake in a newly formed property loan stock company. The other 50% of the property venture will be held by Brian Goldberg and Ilan Kaplan, two former executives from Redefine Property. The new venture is relatively big deal for Trematon, which boasts a market capitalisation of around R240 million on the JSE. The properties accumulated in the new venture will be housed in Trematon Management Company (TMC), which has – as an initial investment – snapped up five properties with a collective value of R90 million. The properties were acquired from Redefine. The new property investment by Trematon is an interesting tack. Not too long ago the company lightened its property profile by opting to sell its majority stake in JSE-listed Ingenuity Property to concentrate on its directly owned properties held in Club Mykonos Langebaan (CML) as well as its interest in Boulevard Park on the Cape Town foreshore. In fact, the biggest change in Trematon’s financial position in the half-year to end February 2011 was the change in the group’s shareholding in CML from 34% at the end of August 2010 to 87%. This change followed a successful offer by Trematon to minority shareholders in CML (which aside from seaside property also owns a significant minority stake in the Mykonos Casino, which may have a shot at the second Cape Town casino licence). Perhaps the fact that Trematon has deemed that CML’s operations have been “restructured to a level appropriate for the current level of economic activity” has spurred the decision to top up on property again. According to the latest interim results the CML group made a profit of R4.1 million – a performance that can be considered good in the prevailing economic climate. But Trematon chairman Monty Kaplan cautions that future growth at CML is heavily dependent on the state of the property market on the West Coast. Kaplan says the West Coast remains subdued, but adds that the land available for development and sale is well located and should generate good returns. “CML is the biggest single investment made by Trematon during the period and is expected to yield good long-term returns once the property market recovers,” he says.

Source: Cape Business News  http://www.cbn.co.za

Sectional title trustees can’t dodge responsibilities

The Sectional Titles Act recognises that the trustees of sectional title bodies corporate, unlike the directors of independent companies, are unpaid volunteers and may lack the full experience required for their positions.

For this reason it indemnifies trustees against prosecution for what are clearly errors, but still retains its full powers should they try to defraud their schemes or act with gross negligence.

Although protected in this way, sectional title trustees are responsible for the financial health of their schemes, the care and maintenance of their buildings and facilities and the welfare and security of their members, says Michael Bauer, general manager of IHFM property management company.

“It is all too easy for a trustee to take the attitude that the body corporate was desperately short of volunteers so they have allowed themselves to be elected, but that not much should be expected of them. This laid-back approach to a trustee’s responsibilities can be very harmful to a body corporate,” he says.

“There will be times when trustees need to be proactive and, possibly, hard. They have to stand up to members who are letting the side down by not paying their levies or by behaving in a way that is distasteful to other members. This can be uncomfortable if trustees are living in the same scheme as those who need to be disciplined. It often makes being a trustee unpopular – but that is something they have to accept.”

He says many trustees have come from backgrounds where they had no or limited chances to acquire financial, accounting or legal knowhow. But this does not alter the fact that they have to get to grips with the sectional title scheme’s accounts, if necessary calling in an accountant to help them.

“A “get-involved” message has also to be given to body corporate members: if they don’t attend special and annual general meetings, they have only themselves to blame if things go wrong.

“Not long ago, the slackness of members and their trustees in a certain scheme allowed a managing agent (who was later declared bankrupt) to misappropriate funds and to accumulate R500 000 in municipal charges arrears. Had the members attended the AGM and discussed the accounts or taken them to a creditable auditor, the problem need never have arisen.

“One of the trustees’ most important tasks may be to appoint a good managing agent. Here experience has shown that it can be unwise to select an estate agent, even one who may have been highly effective as a salesperson.

“Good salespeople are not often good administrators because they usually dislike clerical and figure work. The ideal managing agent would be an accountant with a good dose of common sense and a sound understanding of the Sectional Title Act for legal matters.”

Source: SA Property News http://www.sapropertynews.com

Managing Sectional Title Property

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Lifeblood of the body corporate Whether you are an owner, a trustee, a managing agent or an attorney, you will agree that levies are essential to the efficient running of sectional title schemes. Levies are the ‘lifeblood’ of the body … Continue reading →

Whose property is it anyway?

We’ve just gone to the polls to put our X where our mouth is, and hopefully the bad guys are out and the good guys are in. But when it comes to more personal matters, are we as decisive?

It’s all about service delivery, and government is not the only area where it’s sadly lacking. As a member of a body corporate or property owner’s association that employs a property management service, you are exposed to the good, the bad or the downright incompetent. If it’s either of the last two, what are you doing about it?

The people have learned the value of burning tyres and lobbing bricks to get their point across. A bit extreme, but a lesson nevertheless. All it needs is a decisive ‘no’ to rid yourselves of poor service when it comes to property management. If you are in any doubt about taking the step to replace your agents, just remember, it’s no exaggeration to say that the value of your property is determined by the quality of its management service. Try selling a unit in a body corporate whose finances are in the red.

Take the test and see how your property management rates: -

Do you know what your levies are spent on? Do your levy invoices arrive on time and are they correct?  Do you receive regular financial reports?  Are insurance claims properly dealt with? Have you had to pay a special levy because expenses have not been adequately provided for? Is the BC/managing agent responsive to your concerns and queries? Are you subsidising owners who are not paying levies? Are levies being increased because of bad financial management – or lack of recovery of?

Just one iffy answer to any of the above, and you need to make a call.

De La Porte Property Management (DLP) offers you a fresh, comprehensive, professional service at a price that suits the requirements of your complex. So the cost is entirely in line with your budget, and could save you money. We are members of the National Association of Managing Agents (NAMA) and align ourselves with its code of conduct. And just so you know we take this whole business seriously, we use the industry’s ultimate property management software.

Our services include (but are by no means limited to)  Commercial, industrial and residential property management.  Day to day maintenance and operational support.  Arranging and attending POA meetings, arbitration hearings, AGMs & more …  Practical application of our in-depth knowledge and understanding of Sectional Title and general property legislation.

We also offer a bookkeeping service with additional benefits, at nearly half the price of the industry standard, for smaller complexes that either can’t afford or don’t need the full management service.

Call us on 021 551 9777 or email us on admin@delaporte.co.za or take a look at our website www.delaporte.co.za to see a detailed list of our services and to find out more about what we do.

Companies Act No. 71 of 2008 is in operation

By Graham Paddock

The new Companies Act that came into effect on 1 May 2011 has been described as “a revolution for South African corporation law”. While this replacement legislation is arguably the most important statute that exists from a South African commercial law perspective and is certainly a fresh start for company law, in my view it is an evolutionary development rather than a revolutionary one.

The provisions of the new Act and its Regulations, Forms and Notices, all of which are available online in Paddocks Club, updates South African company law and brings it in line with that of our major trading partners. Our company law has always been closely modeled in that of the United Kingdom, as has that of Canada, Australia and other Commonwealth countries. The new legislation integrates the best practices of these analogous jurisdictions, most notably Canada, with South African common law and commercial requirements. It also takes into account the recommendation of the King Commission reports and thus signals a fundamental shift in corporate governance principles.

The Act is much more accessible than its predecessor, being drafted in plain language and logically structured. My principle interest in the Act is its effect on Homeowners Associations that were established as section 21 (now “non profit”) companies. In this article I will give a very brief overview of this newly implemented legislation.

First, some highlights:
1. While the Close Corporations Act will remain in force for as long as it is needed to cater for existing CCs, it will be amended so as to incorporate the new features of the Companies Act. No new CCs can be formed.
2. The new Act provides a simpler approach to corporate structures. There will only be Profit Companies (of which there are just a few types) and Non Profit Companies. All new companies will have a single fundamental governance document, a Memorandum of Incorporation.
3. Directors are more strictly responsible and their responsibilities and liabilities are more clearly set out.
4. There is a requirement for “plan language” in company communications
5. There is provision for electronic communication and online meetings.
6. A local variation of the “business judgment” rule has been introduced.
7. Most of the sanctions for non-compliance with the requirements of the new legislation are civil, not criminal.

Looking further at the issue of accessibility, the Act consists of 225 sections (the previous legislation had twice as many) and they are clearly labelled. The government has created a really impressive Commission website: www.cipc.co.za, at which all the legislation, forms and many guidance documents are available.

The South African version of the business judgment rule is worth looking at in detail. The Act provides that a director is protected against actions for breach of the duties of care, skill and diligence and the duty to act in the best interests of the company in relation to a matter where that director has:
(a) taken reasonably diligent steps to become informed about the matter,
(b) either had no conflict of interest in relation to the matter or complied with the rules on conflicts of interest and
(c) had a rational basis for believing, and did believe, that his decision was in the best interests of the company.
In acting as such, a director may rely on information given by and actions taken by persons such as employees and advisers who that director reasonably believes to be reliable and competent.
These provisions mark a step towards greater accountability on the part of directors – no more initialing at the bottom right of each page without looking at the content, at least not without risk!

As to structure, the Act is divided into 9 Chapters and it has 5 Schedules. The Regulations are divided into 8 Chapters and they have 3 Annexures. Finally there are a set of Forms and Notices. Given the very wide scope of commercial and non-commercial activity that is governed by the new Companies Act, it is as compact as it could reasonably be. No one said it was going to be really short, so we each need to identify the bits that apply to our activities and read them.

For the directors of home owners’ associations, I suggest the following initial readings:

In the Preamble & Chapter 1: Interpretation, Purpose and Application I suggest you first look at Part A: Interpretation and focus on section 1. Definitions and 5. General interpretation of Act. Then in Part B: Purpose and application, read sections 8. Categories of companies and 10. Modified application with respect to non-profit companies.

In Chapter 2: Formation, Admin. & Dissolution, head for Part C: Transparency, accountability and integrity of companies and go through section 24 to 34. These cover important issues of company records, information and returns. In Part F: Governance of companies, I suggest that you hunker down and read sections 57 to 78. These cover internal company governance issues such as member’s rights, meetings and directors – all important material.

Have a quick look at Chapter 6: Business Rescue and Compromise with Creditors (the new procedures that replace the previous Judicial Management provisions) and then in Chapter 7: Remedies and Enforcement, go to Part B: Right to seek specific remedies and look at sections 162 an 163. Chapter 8: Regulatory Agencies and Administration of Act deserves a quick look and then in Chapter 9: Offences, Miscellaneous Matters and General Provisions I suggest you go to Part A: Offences and penalties and read sections 214 to 217.

Of the Schedules to the Act, I suggest that you read both Schedules 1 and 5 carefully. In the Regulations I suggest that you should look Chapter 2 – Formation, Administration and Dissolution of Companies, Part C– Transparency, accountability and integrity of companies. Here regulations 21 to 30 are important, dealing with company offices, records, information, financial years, reporting standards and annual returns. And by the way, all HOAs will have to render annual returns.

Right, so here is what you have to do:
(a) Get access to a copy of the Act, Schedules, Regulations, Annexures, Forms and Notices. Bear in mind that the original Act 71 of 2008 was amended by Act 3 of 2011 just before it came into operation, so make sure you have the amended Act. (All of these documents are accessible online to members of Paddocks Club under the heading HOA in the Library.)
(b) Start by reading the parts identified above – you won’t struggle with the language.
(c) Go to http://www.cipc.co.za/ and look around, read the explanatory texts and bear in mind that the prescribed forms have a lot of embedded explanatory material, so they are worth going through.
(d) Starting now, apply the provisions of the Companies Act 71 of 2008 to your corporate Homeowners Association and bear in mind your new responsibilities as a director under this Act.

Source: http://www.paddocks.co.za

Administration and Risk Management in Property Management

Administration and risk management is a critical component of real estate property management. The record-keeping function must be carefully managed and, the greater the level of detail, the better the likely results. This function involves all the others, as: the … Continue reading →

Tenant and Occupancy Management Function of Property Management

A property can be nicely designed and in a desired area, but it will not be a profitable rental property if tenants aren’t managed properly and occupancy maintained at a high level. When tenants are not happy, they vacate at … Continue reading →

The Financial and Marketing Functions of Property Management

Property management operations budgeting: The real estate property management company, in consultation with the owner, will prepare detailed budgets for the day to day operations of the property. This function involves aspects of all the other functional areas, as it … Continue reading →