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The role and power of trustees in Sectional Title Schemes

Mar 25, 2022 | Debtor Finance, Project Loans

One of the most important decisions that bodies corporate must make every year is to appoint trustees. Trustees form a vital component of a sectional title scheme, and they are relied upon to do their duties with the scheme’s interest as their priority. However, while trustees are a vital part of the body corporate, it’s important to remember that the members also need to be considered. So, let’s take a look at the role and power of trustees in sectional title schemes. 

Why trustees are necessary

Trustees are appointed by the body corporate to perform the functions and exercise the powers of the body corporate in making day-to-day decisions about the scheme so that the owners will not need to be consulted every time a decision needs to be made. Trustees can save time and energy for a scheme, and they can keep the scheme on track both financially and when it comes to building maintenance, recreational areas, employment and so on.

Trustees are elected by the body corporate at the AGM (Annual General Meeting). Nominations must be in writing. Trustees volunteer their time and efforts in most instances without remuneration. Trustees may be re-elected at subsequent AGM’s if properly nominated. The trustees often work with a managing agent to keep the sectional title scheme running smoothly. 

While trustees have the power to make certain decisions without the body corporate’s approval, they must do so acting honestly and in good faith; whilst being fair and following due process. 

Basic toolkit for trustees

To be an informed and effective sectional title trustee, the following is needed:

  • A copy of the Sectional Titles Schemes Management Act (STSMA)
  • A copy of the Registered Management Rules
  • A copy of the Conduct Rules or House Rules
  • A copy of the Community Schemes Ombud Service Act
  • A copy of the Sectional Title Plan for your scheme
  • A cool head and a healthy amount of common sense
  • A hands-on approach and clear communication 
  • To act in good faith, to the benefit of the scheme and without receiving any personal economic benefit from it

The above toolkit will serve as a good base for trustees to get up to speed on what they’ll need to know, to fulfil their duties according to the law and the rules of the scheme they’re in. Now that we know what will assist trustees in making better decisions let’s take a look at their duties. 

Trustee duties

Trustee duties are not limited to but include: 

  • Working out the levy amounts, collecting levies and administering levies. 
  • Opening and upholding a bank account for the scheme. 
  • Making sure that all common property like recreational areas, gardens and lawns are looked after within the scheme.
  • Compiling minutes of meetings (trustee meetings and general meetings).
  • Keeping an accurate record of the current rules of the scheme.
  • Making sure that all building upgrades or improvements are insured, however, this doesn’t include the contents of the buildings.
  • Arranging the AGM and conducting it each year, along with any special meetings. This includes preparing any documents that are needed, such as the budget. 
  • Applying the body corporate’s funds in accordance with the budget approved by members.
  • Keeping the scheme’s books accurate with records of all funds received or spent. The trustees should ensure that the scheme’s financial statements are audited by a professional company as well.  

Trustees may also:

  • Hire employees or agents, such as a managing agent.
  • Invest funds that aren’t required for use by the scheme immediately. 
  • Find service providers for various services.
  • Create portfolios for specific duties to be fulfilled by chosen individual trustees. 

Trustee decision making

Decisions made by trustees should be done by majority vote. This can be done either within a meeting setting or via a resolution in writing. For a trustee meeting to take place, 50% of the trustees by number (having regard to the number determined at the AGM), but not less than two, must be present to form a quorum. These meetings can be called at any time to make necessary decisions. When a decision is made via a resolution in writing, instead of at a trustee meeting, a notice in writing containing the text of the proposed resolution should be sent to each trustee. The majority of trustees (having regard to the number determined at the AGM) should indicate that they agree with the resolution by signing it before the expiry of the closing date specified in the notice. 

While trustees are trusted to make key decisions for the scheme, their powers and how they exercise it are subject to judicial scrutiny. We can see this illustrated in the Nov 2021 Supreme Court of Appeal judgement of Trustees of Legacy BC v BAE Estates, where it was found that the High Court or CSOS [in terms of s39(4)(c) & (e) of the CSOS Act] can review a trustee resolution if trustees did not act fairly or follow due process. Trustees are liable for any damages or losses that the body corporate suffers if they act in breach of their fiduciary relationship to the body corporate. This highlights the importance of choosing trustees who will act with the necessary care, skill, diligence and fairness, follow the correct processes and stick to the sectional title rules and laws. 

The bottom line

To take care of the daily running and financial success of a scheme, trustees are a necessary and powerful part of the body corporate. However, they cannot make decisions to the detriment of the body corporate as a result of gross negligence, fraud or other unlawful activities or occurrences. The role of trustees should be to the benefit of the scheme, and the scheme’s homeowners, which means that a good board of trustees is required to run the scheme effectively and keep owners happy.

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PROPELL SPECIALISED FINANCE (PTY) LTD
1999/024353/07 | NCRCP/1929

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1999/004482/07 | NCRCP/6308

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