Trustees need to be in the know

Introduction

The elected trustees of a sectional title schemes have been given many powers and duties in the Sectional Titles Schemes Management Act, 8 of 2011 (“the STSM Act”). In particular sections 3, 4 and 5 of the STSM Act prescribe the functions, powers and additional powers of the body corporate that are to be performed by the trustees. These powers need to be exercised with the highest care. With great power comes great responsibility. It is therefore necessary that the trustees obtain a certain level of education and training.

What are some of the powers of trustees?

Some of the powers of the trustees include appointing agents and employees; purchasing or otherwise acquiring, taking transfer of, mortgage, sell, give transfer of or hire or let units; to purchase, hire or otherwise acquire movable property; to establish and maintain on the common property suitable lawns, gardens and recreation facilities; to borrow moneys and to secure the repayment of moneys borrowed; investing money in the reserve fund; entering into agreements for the provision of amenities or services by the body corporate to an owner or occupier; letting a portion of the common property to any owner or occupier by means of a short term lease; and doing all things reasonably necessary for the enforcement of the rules.

What are some of the functions of trustees?

Trustees are required to establish and maintain operating and reserve funds; budget for income and expenditure; raise levy contributions in proportion to the owners participation quotas; open and operate a bank account in the body corporate’s name; insure the building, pay the premiums and submit insurance claims; maintain common property, as well as the pipes, wires, cables and ducts, and any plant, machinery, fixtures and fittings used in connection with the common property; comply with orders from competent authorities in respect of repairs/maintenance; maintain lists of contact details of all the members; and maintain all the books of account and other records of the body corporate.

The fiduciary responsibility of trustees

Section 8 of the STSM Act sets out the fiduciary responsibilities of the trustees. In addition to this, regulation 14 of the Community Schemes Ombud Service Act, 9 of 2011 (“the CSOS Act”) places further responsibilities on scheme executives.

It specifically requires that a trustee must take reasonable steps to inform and educate themselves about the community scheme, its affairs and activities and the legislation and governance documentation in terms of which the community scheme operates. It further requires trustees to take reasonable steps to obtain sufficient information and advice about all matters to be decided by the trustees to enable him or her to make conscientious and informed decisions. Additionally it states that trustees must attend all body corporate and trustee meetings, unless excused by the chairperson of the trustees on reasonable ground. It also requires trustees to exercise an active and independent opinion with respect to all matters to be decided by the trustees. It also states that trustees must exercise due diligence in relation to any business of, and necessary preparation for and attendance at meetings of the trustees or any committee to which such trustee is appointed.

This Regulation also clearly states that these obligations are in addition to and do not derogate from the fiduciary obligations of the trustee in terms of the common law or any applicable statute.

Conclusion

Ideally, trustees should be properly elected, experienced and qualified in all matters relating to sectional titles. Trustees, as their name implies, are in a position of trust and must manage the scheme for the benefit and in the interest of all the owners.

From the above discussed powers and responsibilities of trustees, it is clear that holding office as a trustee involves a high duty of care, hard work, dealing with varied and strong personalities including apathetic and ignorant owners, and complicated physical, financial and legal issues. However, trustees do have a certain degree of control in the administration of the scheme and can contribute constructively to the scheme and the upholding of the value of the properties within the scheme. Trustees therefore play a vital role in the success of the scheme.

Trustees need to know and understand the sectional title legislation and follow the applicable rules in such a way so as to organise the sectional title scheme in the owners’ best interests. It is for these reasons that trustees should endeavour to educate themselves on how to best exercise their powers and duties for the benefit of the body corporate. The body corporate should insist on the education and training of their trustees. This will ensure that trustees can have access to the knowledge and information required to properly execute their tasks as the elected executives of the scheme. In this regard we encourage trustees to make use of our trustee training material.