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If you own a property in a Sectional Tile complex or an estate, you need to ensure that your managing agent is correctly registered with the Property Practitioners Regulatory Authority (PPRA) and has a valid Fidelity Fund Certificate (FFC), or you could be at considerable financial risk.
That’s the advice of Andrew Schaefer, MD of leading property management company Trafalgar, who notes that the PPRA differentiates between different categories of property practitioners and, since February last year, has required managing agents to hold a different type of FFC to those agents who sell and rent properties.*
The PPRA makes a distinction in the rental property sector, for example, between rental agents, who are regarded as those who focus only on tenant placement and securing leases, and managing agents who will, among other duties:
- Collect rent on behalf of property owners/ landlords;
- Conduct rental property inspections on behalf of owners;
- Manage the maintenance of rental properties and any repairs needed;
- Liaise between property owners and tenants; and
- Serve notices to tenants on behalf of owners.
Then when it comes to community housing schemes like Sectional Title (ST) complexes and estates or retirement villages, the PPRA defines managing agents as those appointed to:
- Collect levies on behalf of a body corporate or an HOA;
- Assist the trustees or directors of the scheme to manage day-to-day operations such as security, cleaning, garden maintenance, and refuse removal;
- Assist with budgeting, financial reporting, and payments to body corporate or HOA creditors such as the local authority, insurers, and service providers;
- Assist trustees or directors to maintain compliance with all relevant legislation and regulations, including the Community Schemes Ombud Service (CSOS) Act, the Consumer Protection Act, the Occupational Health and Safety Act, and POPIA; and
- Assist with the preparation of 10-year maintenance, repair, and placement plans as required by the Sectional Title Schemes Management Act.
“However, no matter how efficient or helpful they are, managing agents without proper registration and the correct FFC are operating illegally and cannot legally claim commission or payment for their services,” Schaefer notes.
“More important, though, is the fact that schemes that appoint unregistered or improperly registered managing agents may not be able to claim any compensation from the PPRA Fidelity Fund if their managing agent engages in any malpractice or financial mismanagement. And with the large sums often involved in the collection of levies and the disbursement of payments to local authorities and service providers, that translates into a serious risk.
“This may be mitigated if the scheme has taken out insurance against the loss of any funds for which it is responsible due to fraud or dishonesty committed by any trustee, director, managing agent, or employee, as stipulated in the regulations made under the CSOS Act and in Prescribed Management Rule 23 for ST schemes.
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“But schemes that either have no managing agent or an unregistered managing agent may not be in compliance with these insurance provisions, leaving them exposed to significant potential losses and the inability to pay their creditors. There have been several cases of managing agents absconding with hundreds of thousands of rands worth of levies they had been entrusted to manage.”
“In addition,” he says, “an unregistered managing agent may also be an unqualified agent who does not actually have the knowledge needed to help run a community housing scheme properly, and this can also lead to all sorts of problems, such as levy defaults not being addressed and maintenance or repair projects not being properly supervised. These can quickly lead to the scheme becoming run-down and to a deterioration in home values.”
In the near future, all managing agents will also be required to study and pass professional exams before they can register with the PPRA and obtain an FFC. The PPRA, together with a panel of experts, including Trafalgar’s own Karien Coetzee, is developing an additional specialist course that managing agents must complete. This is currently in the accreditation phase.
Annual and relevant Continuing Professional Development training will then also be available for property practitioner managing agents to ensure industry and professional standards are enhanced and upheld.
