The property sector has a vast array of legal duties imposed on it from the developer of property to the buyer and anyone in between has some legal obligation that needs to be met. I recently received a call from a client, asking how they should manage the application of the OHSAct and in particular Section 37(2). This made me realise how easy it is to allow common titles being confused with legal terms.
The main “titles” used in the property sector are the following:
The Property Developer, the owner, the landlord, the managing agent, or in some cases the property manager, and the tenant.
The answer to this is not as obvious as one would think. But the point of departure will always be the relationship between the parties. I used the phrase “master-servant” relationship to explain it although not as a derogatory reference but as the origin of the principle of vicarious liability.
The best term to use is however a “vertical relationship”. Examples of a vertical relationship is a “father and son”, an “employer and employee”, a “principal contractor and a sub-contractor”, a “company and a service provider” etc. and it establishes a Common law Duty of Care.
On the opposite side you have a horizontal relationship. This is typically a “brother and sister” or “Contractor A and Contractor B”, both working for the same Principal Contractor. We will only focus on the Vertical Relationship and the parties in this relationship will depend on each contract.
Scenario A – The Retail Shopping Centre
In these multi-storey, multi-tenant buildings, matters can get confusing very quickly. Typically, you will have an Owner of the Building, which could be an investment company like Old Mutual, Redefine Properties, Growthpoint etc to name a few. They own the building as part of an investment portfolio. This investment portfolio can take on two forms, either as a Shareblock , Syndication or another secured investment instrument, or it could be under Sectional Title.
In the former, the owner would appoint two mandataries, i.e, a Centre Management Agency, like Word-of-Mouth as example, and a Property Manager.
The Centre Managers are normally responsible for marketing and promotion of the Centre to attract consumers thereby increasing the Turn-over-based leasing of the centre.
The Property Manager on the other end is responsible for the Building envelope and services, including the maintenance of the Fire, Electrical and HVAC installations.
Both these parties reports to the Owner.
Scenario B – Residential Estates, Office Parks and Industrial Parks
Just like in the latter scenario above, this type of property falls under the ambit of the Sectional Title Schemes Management Act, 2016 or under the concept of a Home/ Property Owners Association. Here we typically have a consortium of owners referred to as Members of the Body Corporate. Each are allocated a unit within the property, and each unit then also represents a number of votes they have in managing the body corporate. These owners are commonly referred to as the Landlords. Mostly because they seldom would occupy their units, but lease it out to tenants.
The Body Corporate then appoints a Board of Trustees to manage its affairs, in similar fashion to a Board of Directors would manage a Company.
In most cases the Trustees then appoints a Managing Agent to assist the trustees in the execution of their legal functions defined in the STSMA Regulations and Rules.
Each Member of the Body Corporate is then either a tenant or a “Landlord”.
In both Scenarios above, the OHSAct applies and there is a vertical relationship established somewhere within the management of these properties which invokes Section 37(2).
The client’s concern was who signs the Section 37(2) agreement with who?
Here are a few “rules of thumb” to keep in mind before we answer the question.
- An agreement shall and always will have only two parties or signatories.
- The OHSAct is effected by these agreements only has far as the burden of proof in Section 37(1) is applied to the one party (at the top of the vertical relationship) exercises control and direction over the other party (at the bottom of the vertical relationship) within the prescripts of Reasonable Duty of Care.
- The prescribed duty of care is found in the “General Duty Clauses” or Section 8, 9 and 10(4) of the OHSAct.
For example: The Owner of a structure is responsible to ensure the structure is safe for continued use. Those contractors who assists in the maintenance of the structure is then contracted to perform the work needed from time to time, bringing a Section 37(2) agreement into being.
Now if the owner appointed a Property Manager (PrM), and under the agreement between the Property Manager (Or sometimes also called a Facilities Manager) and the owner, the Property Manager is charged with the duty to manage the maintenance contractors, who signs the agreement?
Once again it will depend on the agreement. If the property manager is under a Service Level Agreement out of which a duty to procure, control and remunerate the contractors is established, those contractors will become his/her subcontractors and the PrM becomes a principal.
If no duty is so created, the Property Manager will be an Agent for the owner and the owner enters into separate agreements with each of the contractors while the PrM manages the agreement (standard process in construction projects).
Each party will remain liable for OHSAct compliance in their own right, but the liability of the Owner will depend on the agreement and how the mandatories are managed in terms of compliance.
In Scenario B above, each landlord in turn becomes an “owner” albeit only of a Unit within a Complex. In the case of Sectional Title units, the body corporate as a collective is responsible for the “common property” like the entry roads, the security gates, the parking areas and open public areas etc, while the Unit owner is in charge of his own unit and can independently of the body corporate enter agreements with his/her own service providers and contractors.
In properties where there is a Home Owners Association or Property Owners Association which does not fall within the ambit of the STSMA, the Association will be treated the same under the OHSAct.
The only difference is that in the case of the STSMA, a strict liability is placed on the Body Corporate in Section 3 to comply with all applicable laws as it relates to the common property.
How does the Construction Regulations Apply?
It applies to Owners only as far as the post-construction duties of the Owner of a structure survives the construction process in Regulation 11(2).
It will then also apply to whoever is tasked by the Owner or Body Corporate to perform Construction work, in which case the Owner or Body Corporate becomes the Construction Client.
Getting the right advice
Before jumping into the Board Room with pen in hand, get the advice from a reputable legal advisor or Property Risk Management Consultant to assess your particular scenario and advise you accordingly.
In the Sectional Title realm, the legislative requirements have changed as recently as 2016. It may be advisable to re-assess your current property portfolio.