By Chantelle Gladwin, Partner and Lauren Squier, Candidate Attorney
This article explains the nature and purpose of an executive managing agent for the purposes of the Sectional Title Schemes Management Act 8 of 2011 (“the STSMA”), it’s Regulations, The Sectional Title Act 95 of 1985 (“The Act”) and the Prescribed Management Rules (“PMR”) with a specific focus on what the duties of such an executive managing agent are where they have not been spelt out in a written document.
Definition and Concept
Section 4(a) and Section 7(1) of the STSMA enable trustees of a sectional title scheme to employ any agents or employees that the body corporate deems necessary to assist them in managing the scheme. The STSMA Regulations and the PMR 28(5)s define a “managing agent” as any person who provides scheme management services to a body corporate for reward, whether monetary or otherwise, including any person who is employed to render such services. A ‘normal managing agent’ (who only exercises trustee functions or powers when they are given direction to do so) is appointed in terms of PMR 28(5) and can be appointed on an ordinary resolution.
The STSMA Regulations also define an “executive manging agent” as a manging agent appointed to carry out all the functions and powers of the trustees in terms of rule. PMR 28(1) introduced this concept into law. In terms of PMR 28(1) a body corporate may: “by special resolution, appoint an executive managing agent to perform the functions and exercise the powers that would otherwise be performed and exercised by the trustees”. The idea is that the executive managing agent will take care of all of the obligations of the trustees in terms of the STSMA, the Act and the Regulations. PMR 28(2) also provides that members holding at least 25% of the total quotas of all sections may apply to the Community Schemes Ombud Service (“CSOS”) for the appointment of an executive managing agent.
What does the Executive Managing Agent do?
Where the executive managing agent is appointed by the trustees, one would normally find that a contract (a “management agreement”) has been concluded that defines the scope of the executive managing agent’s mandate. Where CSOS appoints an executive managing agent, it is less likely that there will be a written document setting out the duties.
But what happens when there is no written agreement as to what the executive managing agent must do? The answer lies in the law of agency read with the provisions of the STSMA and the PRM. The idea is that the executive managing agent takes over all duties of the trustees – and so in the absence of any agreement limiting the scope of those duties, the executive managing agent would be responsible for everything that the trustees would normally have done.
Support for this view is found in the Regulations, where it is provided that, in determining the number of trustees to be appointed to serve at an Annual General Meeting (“AGM”), that this process is not applicable in a scheme that is managed by an executive managing agent.
In addition, the executive managing agent has reporting responsibilities in terms of which, every four months, members of the scheme must be updated as to the administration of the scheme.
Although the STSMA’s Regulations and PMR’s do not expressly prescribe that an executive managing agent is appointed in place of the trustees of a scheme, the wording of the relevant sections outlined above support this notion and creates the impression that an executive managing agent is legally able to operate and run the entire scheme by taking over all of the duties of the trustees, and that this can happen even where there are no trustees appointed. It may very well be a solution to the impasse that many body corporates face when they do not have validly appointed trustees and so cannot call meetings at which decisions relating to the administration of the scheme can be debated and taken.