TRUST ACCOUNTS AND SAVINGS ACCOUNTS

Every body corporate must establish a fund to repairs, upkeep, control, manage and administer the common property. A body corporate raises the funds required by imposing levies on all the owners in a complex. The body corporate should make reasonable provisions for future maintenance and repairs.

The body corporate must open and operate an account with a bank or building society. It is also possible for a body corporate to use the managing agent's trust account. This is provided that the managing agent is a registered estate agent with a fidelity fund certificate.

In my opinion, it is better practice for each body corporate to open and operate a separate bank account as it provides more control to the body corporate. If the managing agent's trust account is used, more than one body corporate's money is being deposited into that account. This could result in hundreds and thousands of transactions in the trust account. As there are more transactions there is a greater chance of error. The body corporate also does not have any direct control over whom has signing power to this account, and unethical people may therefore have access to this account.

However any theft of funds in the trust account should be re-imbursed by the Estate Agents Board's fidelity fund, this process may take a while and during this period the body corporate will not have any access to its funds should any payment be required. This spells out a special resolution for the owners to ensure that all the urgent accounts are paid.

The body corporate will not have to rely on the managing agent for statements, and wait for their audit to be completed before knowing, with certainty, what funds are available to the body corporate.

On the other hand if the body corporate operates its own bank account this account will not be covered by the Estate Agents Board's fidelity fund. Therefore if any trustee runs away with all the body corporate's money this money is lost until legal proceedings have been finalized. Although the body corporate will know of this situation, if it ever occurs, quite quickly.

The body corporate can open a bank account as a trust account in terms of section 32(1) of the Estate Agents Act of 112 of 1976, and a confirmation letter from the bank is sent to the Estate Agency Affairs Board. An account opened in this manner will be covered by the fidelity fund of the Estate Agency Affairs Board.

The best route is to have dual (or more, if necessary) authority on the body corporate's own bank accounts. One being a trustee and the other being the managing agent. It is unlikely that a trustee and the managing agent will conspire together to misappropriate a body corporate's funds.

The body corporate may invest any funds that is not immediately required for payments for repairs, maintenance, control, management, administration etc. These ‘excess' funds may be invested in a savings account at a bank or building society.

The body corporate cannot distribute any gains or profits that it makes to the members of the body corporate (owners of the units within a complex). This means that any interest earned on the savings, may not be paid out to the owners.

The body corporate can only deposit and invest their funds with a registered bank or building society. Therefore the body corporate cannot invest on the stock exchange, in a new sports car, at any charities, any financial institution other than a bank, or at a casino.