Did you know that if a Sectional Title Scheme chooses to employ an Executive Management Agent, the appointed person can make decisions regarding maintenance, levies, and the running of the overall budget even though they don’t sit on the Body Corporate or own a property in the scheme? 

According to Pearl Scheltema, CEO of Fitzanne Estates, there is a vast difference between a Managing Agent and an Executive Management Agent, and a body corporate should only ever consider the appointment of the latter as the last resort.

“There is quite a bit of a disconnect between the public understanding of the industry terms we use in this respect, and their actual meaning,” Scheltema explains.

 “A Managing Agent is appointed to take care of the administration, finances, and secretarial duties of a Sectional Title Scheme in accordance with the terms of a contract. In this case, the Managing Agent is a service provider who is instructed by the Trustees as representatives of the Body Corporate. The Trustees give instructions, and the Managing Agent fulfills it within the guidelines of a managing contract.”

An Executive Management Agent, on the other hand, is typically appointed by way of a special resolution and can be recommended by CSOS from their panel of preapproved EMAs.

“An Executive Management Agent has nothing to do with a Managing Agent at all. While there is a widespread misconception that these two roles are interchangeable and that you can employ one instead of the other, this is not the case. An Executive Management Agent’s duties and responsibilities are set out in the Prescribed Management Rules Annexure 1, rule 28 (1 – 4).

“When a Body Corporate is unsuccessful in appointing an EMA for themselves, they can approach CSOS with motivation as to why an Executive Management Agent should be appointed, in which case CSOS will make a ruling in terms of the appointment. An appointment will then be made from their selected panel of Executive Management Agents.”

It sounds like a very convenient solution, but according to Scheltema a move like this should be considered very carefully.

“In my opinion, the appointment of an Executive Management Agent replaces the rights, duties, and obligations of Scheme Executives. As such, I would always recommend that an appointment of this nature should the very resort for a Sectional Title Scheme,” she advises.

Situations in which Scheltema notes that it will be necessary to employ an EMA, include the following:

• The Sectional Title Scheme / Body Corporate is completely dysfunctional
• Scheme Executives are unable to fulfill their duties
• Scheme Executives are not as knowledgeable as the law requires them to be
• No one indicates that they are willing to serve as Scheme Executive during the Annual General Meeting

“In extreme cases like these, the appointment of an Executive Management Agent would make sense,” says Scheltema. “However, owners have to realise that this removes certain rights from Scheme Executives. It means that a complete outsider will be making decisions about aspects like maintenance, levies, and the management of the budget. When this happens, owners and Scheme Executives have no further say in these matters.

“All that the Executive Management Agent has to do in accordance with Prescribed Management Rules Annexure 1, rule 28 (1 – 4) is provide a quarterly report to the owners, and do an inspection once every six months in order to provide this feedback.”

Scheltema also notes that there are concerns about the transparency of the EMA selection process at CSOS, and how they as industry regulators vet and choose the individuals selected for this recommendation. The matter was recently raised on an episode of Fitzanne’s Property Exchange,  and there was a fair amount of concern about political barriers that preclude a lot of highly skilled candidates.

As such, Scheltema recommends that Sectional Title Executives should be empowered to know and understand the Sectional Titles Schemes Management Act, and how best to apply it in practice so the need for an EMA does not arise. Offering affordable, modular training for Sectional Title Executives can make all the difference in the day-to-day running and profitability of the Sectional Title Scheme, and obligation-free quotes are available.

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