NATIONAL ASSOCIATION OF MANAGING AGENTS CONTINUES TO PRESS FOR CHANGE AND IMPROVEMENT

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South Africa — In his New Year's message, Dr Gerhard Jooste, the Chairman of NAMA writes:

"The year 2011 was an outstanding year in which Nama steadily increased its credibility and good standing in the Sectional Title Industry in South Africa. The National Indaba held in May last year contributed in no small measure to this. We are experiencing more and more that Bodies Corporate insist on having a Managing Agent which is a member of NAMA. We also experience more acknowledgements from the Authorities.
The turmoil within the EAAB this past year had a negative effect on NAMA as well. Every meeting we had with the EAAB we met new staff members. Every meeting accordingly required us to explain what NAMA is all about. This was extremely frustrating. Very little progress was made.
The Wendy Mechanik case as well as the Constantia S/T Management case once again put the M/A Industry under the spotlight for all the wrong reasons. NAMA will have a hard and good look at the professional and ethical standards required and to what extent we can and should verify compliance by members."
We are fully supportive of NAMA's ongoing initiatives to differentiate Managing Agents from Estate Agents, and to insist that a sub-committee at the EAAB is set up to fully investigate the exact needs of Managing Agents who, ultimately deal with millions of rands on an annual basis. In addition, we applaud NAMA's requests to include a Managing Agent on the board of the EAAB, and to ultimately transfer the umbrella body function from the EAAB to the Ombud service which will ultimately be created by the Community Schemes Ombud Services Act.

PENALTIES 

A number of Bodies Corporate impose fines on its members for transgressing the Rules of the Scheme, such as for parking in the wrong parking bay. The question arises as to whether or not this is permissible and where the source of Body Corporate authority lies.

1. Whilst it is true that a Body Corporate may amend its Management and Conduct Rules, Annexure 8 and Annexure 9 are the Rules which first govern any Scheme. Neither of these rules provide for the imposition of penalties for non-compliance with the Rules. Thus, in order to include a "penalties provision" in the Management Rules, a unanimous resolution will be required, or a special resolution will be required if the provision is to be included in the Conduct Rules.
2. Further, the imposition of fines will affect the proprietary rights of all the owners, and as such Section (1)(3)(c) of The Sectional Titles Act 95 of 1986 (hereafter called "the Act") applies, which states that "where the resolution in question adversely affects the proprietary rights ... the resolution shall not be regarded as having been passed unless such member consents thereto". Thus, in order to pass a resolution to include a penalties provision in either the Management Rules or Conduct Rules, the written consent of each and every owner will be required.
3. Therefore, as can be seen from above, it would be extremely difficulty to include a penalties provision in the Rules of the Scheme, as you would need the support all the members of the Scheme. The majority of owners would probably not agree to include such a provision.
4. There is a principle in South African law of contract which states that parties are free to enter into any lawful contract they wish. However, neither the Act nor the Management Rules, provide that a Body Corporate may impose fines for non-compliance with the Rules. Many state that the authority comes from the Conventional Penalties Act15 of 1962 (hereafter called "The Penalties Act").
5. The Penalties Act is authority to impose fines for non-compliance with a contractual obligation. Section 1 of The Penalties Act states that "any person shall, in respect of an act or omission in conflict with a contractual obligation, be liable to pay a sum of money...". Thus, where parties are governed by statute, and not contract, the Penalties Act would not apply. The relationship between the Body Corporate and its members is mainly governed by legislation (namely The Act and its Prescribed Rules) and not contract.
6. The Act and the Prescribed Rules govern all aspects of the relationship between Bodies Corporate and its members, and parties may not contract in contravention thereof. As such, Bodies Corporate and its members have a statutory relationship, and not a contractual one.
7. For example, the obligation on members to pay levies stems from Section 37(a) of The Act, as well as Management Rule 30. Thus, it is a statutory obligation, and not a contractual obligation, and as such, the Penalties Act cannot apply. As the Penalties Act cannot apply, imposing a fine in terms of The Penalties Act is unlawful.
8. Section 38(j) of The Act states that the Body Corporate may "do all things reasonably necessary for the enforcement of the rules", which is further confirmed by Management Rule 28(3), which states that "Trustees shall do all things reasonably possible for the enforcement of the rules in force". However, neither The Act, nor the Prescribed Rules state that a Body Corporate may impose financial penalties in order to enforce the Rules.
9. In many cases where fines are imposed, the fine will merely be added to the member's monthly levy account. However, this contravenes one of our main principles of justice, namely the principle of audi alteram partem ("let both sides be heard"). In order to comply with the above principle, a meeting would have to be called, in order to allow the member to put forward his case, but this is rarely, if ever, done. This further confirms that Bodies Corporate act unlawfully when they impose fines for transgressing the Rules of the Scheme.
10. Section 3 of the Penalties Act states that the penalties imposed must be in proportion to the prejudice caused. The difficulty here arises as to who, and how does one decide what is in proportion. For example, who decides that a R100 fine for parking in the wrong parking bay is in proportion to the prejudice? In order to be lawful, one would have to look at the prejudice suffered, and ensure the fine imposed is in proportion thereto, and not to set a fixed penalty for that specific type of transgression. If no-one suffered prejudice as a result of the transgression, then no fine should be imposed according to this provision. This is further confirmation that Bodies Corporate act unlawfully when they merely add the penalties on to the members levy account for transgressions.
11. Although Bodies Corporate impose fines for non-compliance with the Rules of the Scheme, it has been shown that this is not lawful. There is nothing in The Act , or the Prescribed Rules, which gives the Body Corporate authority to impose such fines, and the Penalties Act does not apply in such instances either. Further, there are two fundamental principles of South African law which are not complied with by Bodies Corporate when they do impose fines, firstly the audi alteram partem rule, and secondly that agreements must be lawful. By imposing fines, Bodies Corporate are acting ultra vires, as they have no authority to impose fines for non-compliance with the Rules.