Sectional Title bodies corporate that employ registered managing agents and use the agents' trust accounts for the receipt and disbursement of body corporate money enjoy the best financial protection.



So says Sectional Title expert Bob Gauld, who notes that although section 37(1)(e) of the Sectional Titles Act authorises a body corporate to open and operate its own bank account, there are certain dangers in this practice. 'Recently, for example, the insurance specialist at a large managing agency discovered that the trustees of a body corporate that ran its own accounts had closed an account at one bank and opened an account at another - but forgotten to make arrangements to change existing debit orders, as a result of which the insurance premium was not paid.' Even more serious, potentially, is the practice of allowing a managing agent free rein to control a body corporate bank account without cheques and other documents being countersigned by a trustee. (Prescribed management rule 27 requires every document signed on behalf of the body corporate to carry two signatures, one of which must be a trustee's signature, but bodies corporate sometimes ignore this, especially when trustees are non-resident or difficult to reach.) 'Prescribed management rule 42 allows a managing agent to administer and operate the body corporate's bank account,' says Gauld. 'But in recent correspondence, the Estate Agency Affairs Board (EAAB) stated that: ‘The managing agent is a professional person governed by an Act and a Code of Conduct. It is not allowable that he has any access or control over funds which are not audited and accounted for to the Board.' 'This effectively precludes a managing agent from operating a body corporate's bank account unless there is a 'two-signature' rule in place to retain keep access to and control of the funds in the account in the hands of the body corporate. 'It also makes it clear that the body corporate that employs a managing agent resitered with the EAAB and uses a trust account audited by the EAAB enjoys the best financial protection.' Agency trust accounts are subject to audit by the EAAB and in certain circumstances funds paid into the accounts are protected by the board's Fidelity Fund. Body corporate money in a body corporate account under the control of body corporate trustees enjoys no such protection. Article: Property24 News For the latest real estate news, visit www.property24.co.za