Compliance can be a daunting topic, especially for Trustees and Managing Agents in the Community Schemes Industry. Compliance means in the literal sense to conform to a specification, standard, rule, or law.
There are many laws and legislations that apply to Sectional Title Schemes, such as the Sectional Title, the Sectional Title Schemes Management Act, the Community Schemes Ombud Services Act, the Protection of Personal Information Act, and the Promotion of Access to Information Act which are regular discussion points for Trustees and Managing Agents.
But are you aware of all the other legislation that influences Sectional Title Schemes? The Constitution, the Income Tax Act, and the Occupational Health and Safety Act to name but a few.
Who is responsible for compliance?
Ultimately, the responsibility of a Schemes’ compliance with these laws and legislation falls squarely on the shoulders of the Trustees. Trustees come from various professions and all walks of life, and the scheme executives will not always have the necessary skills and knowledge. It becomes a problem when the Trustees in charge have little to no knowledge of the relevant laws and legislation and have to rely on outside parties to assist them to function correctly and in accordance with the law.
A Managing Agent performs the specific financial, secretarial, administrative, and other management services for a scheme, under the supervision of the Trustees. In this situation, the burden of legal compliance does not fall on the Managing Agent, unless it is specifically agreed to in the contract between the Trustees and the Managing Agent.
How the Property Practitioners Act will affect Managing Agents in the future
With the recent adoption of the Property Practitioners Act, significant changes have started occurring in the Sectional Title industry. The Act specifically regulates that Managing Agents fall under the scope of the legislation and non-compliance can have severe penalties. Not only does the act affect transformation, but also the professionalisation of the industry. For a Managing Agent to be competitive in the market and to stay ahead of change, they will have to professionalise and implement compliance and risk management processes (even though the final responsibility of compliance falls on the Trustees).
Although the cost of compliance and risk management can be significant, the cost of not implementing this will be even higher. It can cause reputational risk, loss of clients, income, and market share. Those Managing Agents that want to stay ahead of the curve will be those who embrace risk and compliance management and do it on behalf of the schemes they manage.
The contract between the Managing Agent and the Body Corporate currently holds the characteristics of a master and servant relationship in favour of the Body Corporate. In professionalising the industry, there should be a change in the contract and the relationship to become more professional and not that of a master and servant, where the Managing Agent will be required to have the necessary skill, knowledge, expertise, and experience to assist in the management of the scheme professionally and compliantly.
At the NAMA Conference in October 2022, Willie Roos from Stratafin will be presenting on how to become compliance champions in Sectional Title Schemes. During this presentation, he will touch on topics such as the Acts and Legislation with which Trustees and Managing Agents are required to be compliant. He will also give practical solutions and free resources for Managing Agents to build a compliance framework to give their businesses the best chance of success with the upcoming changes to the industry.