Understanding the roles of trustees and managing agents

Strong Sectional Title (ST) governance depends on trustees making the decisions, and on managing agents providing professional guidance to ensure that those decisions are sound, lawful and properly implemented.

That’s the word from Andrew Schaefer, MD of leading property management company Trafalgar, who says that one of the most common misunderstandings in ST schemes is the belief that a managing agent is simply a service provider appointed to carry out the trustees’ instructions.

“However, while they do help to administer schemes and implement the lawful instructions of the trustees, the role of managing agents is considerably more complex – and more independent.

“It is vital to note, firstly, that professional managing agents must act on behalf of the body corporate as a whole, not just the trustees. This means that they must provide objective, balanced advice that takes into account the interests of all owners, as well as the legislative and regulatory framework that governs how ST schemes must be run.”

Secondly, he says, an effective managing agent will not simply tell trustees what they want to hear. “An important part of what they do is to assist the trustees to make properly informed decisions, and sometimes that means pointing out a risk, explaining why a proposed course of action is not legally compliant, or speaking from experience to advise trustees to take a different approach.”

On the other hand, says Schaefer, it is crucial for ST owners to understand that the final responsibility for governing an ST scheme does not rest with the managing agent. “In terms of the Sectional Titles Schemes Management Act (STSMA), it is very clear that the responsibility for the control, administration and management of the scheme rests with the body corporate, acting through its trustees.

“These trustees are elected by the owners to exercise judgement and make decisions in all their best interests, and while a managing agent can provide specialist knowledge, prepare budgets and financial reports, advise on legislation and scheme rules, make recommendations, manage administration and implement properly authorised decisions, it cannot assume the trustees’ governance responsibilities.

“Delegating certain functions to a managing agent also does not transfer accountability.

Ultimately, trustees remain responsible for the decisions they make and the instructions they give, as well as the consequences of those actions. And to make good decisions, they do need to familiarise themselves with the STSMA, the Management and Conduct Rules of their schemes, and the financial and operational realities of those schemes.”

Nevertheless, he says, most trustees are not property professionals, but community-minded individuals who have volunteered to serve their fellow ST owners – and really need the support of an experienced and knowledgeable managing agent.

“Indeed, the best governance relationships are those in which trustees are willing to lead and make the decisions for which they have been elected, but are able to rely on a good managing agent to advise, support and challenge them as necessary.”