Hotel body corporate under administration

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The body corporate of a five-star luxury hotel in Cape Town is back under administration for the second time.

Judgment was handed down by Acting Judge Rudi van Rooyen in the Western Cape High Court yesterday appointing Nolands Forensics as administrator of the Cape Royale Body Corporate until August 31, 2015.

Cape Royale Luxury Hotel is a sectional title scheme comprising commercial property and residential units, many of which are in a rental pool.

The body corporate was placed under administration in May last year, following an application by an owner who raised numerous serious complaints against the body corporate, its two trustees and a company that performed some of the functions of a managing agent for the body corporate. The trustees are Pascal Phelan and Bettina Heiberg. Phelan is the developer of the hotel and sole director of the company that was acting as the managing agent for the body corporate. Heiberg is one of Phelan’s employees.

The judgment placing the body corporate under administration the first time dealt with issues including: irregular charging of levies; irregularities in the charging of levies to the developer; maladministration of the body corporate’s finances; lack of transparency; the improper appointment of the company that performed some of the functions of a managing agent (of which Phelan is sole director); problems with annual financial statements; and prejudice to owners.

Nolands Forensics’ first term as administrator expired at the end of May with the filing of a report by Simon Woolley, a representative of Nolands, to the court on his findings. Woolley’s report motivated the re-appointment on the basis that more time was needed to resolve numerous issues, including establishing liability for an R11.7 million loan between the body corporate and the hotel.

The judge said he was satisfied there had been, “at the very least, maladministration and inefficiency on the part of the trustees, both before the appointment of Nolands Forensics and after the termination of its appointment, that warrant the re-appointment of an administrator”. It was likely that the scheme members would suffer substantial prejudice if an administrator were not to be appointed, the judgment says. “History has shown that it is improbable that this five-star establishment, left to its own devices, will get five-star performance from trustees in the near future.”

The application to put the body corporate under administration again was opposed by the respondents because of the cost of administration, and because the administrator failed in its term to finalise the body corporate’s financial statements.

Phelan and Heiberg also undertook not to stand as trustees, but the judge said he was not convinced that this would be a “panacea”.

The judge ordered costs against the body corporate, the trustees and the company managing the rental pool.

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