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Sectional title trustees face complex times
By Staff Reporter
Trustees of sectional title bodies corporate often face a torrid time from property owners as the demand for good governance increases in South Africa, Neville Schaefer, the head of residential property management company Trafalgar, says.
"Owners are increasingly taking trustees to court for negligence, fraud or simply poor performance," Schaefer says.
Although almost all the trustees of residential bodies corporate perform their functions on a part-time basis, the fiduciary duties facing boards of trustees mean that it is no longer a job to be taken lightly, he says. Trustees cannot be paid unless 80 percent of the owners at a special general meeting agree to it, Schaefer says.
Growing activism by owners is forcing trustees to better understand their duties in terms of the Sectional Title Act.
A trustee committee should assign one trustee to take responsibility for compliance and to keep up to date with amendments to the Act, Schaefer says.
"But perhaps the most effective strategy for trustees is to communicate well and openly with owners, inviting them to trustee meetings and keep them informed through a newsletter. This is the best way to establish trust. Admit errors when they occur and get sympathy rather than the fury that usually follows its discovery later," he says.
Trustees are elected at each annual general meeting (AGM). They do not have to be owners in the body corporate as long as the majority of trustees are owners, or spouses of owners, Schaefer says.
At the first meeting held by the trustees, a chairperson must be elected, and he or she will hold office until the conclusion of the next AGM, he says.
Responsibilities of trustees
In terms of the management rules, trustees are responsible for the management and control of the common property, for ensuring the buildings are adequately insured, collecting the levies, controlling the finances, appointing a managing agent and enforcing the rules, Schaefer says.
He says the trustees may not amend the rules, only enforce them. The trustees must ensure the smooth running of the scheme.
Owners are given the opportunity at each AGM to place specific directions or restrictions on the elected trustees, he says, provided this is not in contravention of the Sectional Title Act or the rules of the scheme.
Trustees can convene a meeting at any time by giving not fewer than seven days' written notice, Schaefer says. At these meetings, all trustees are entitled to speak and to vote. Owners are entitled to attend, but cannot vote.
Schaefer recommends that trustees divide the workload by allocating portfolios to each trustee. This helps to avoid a situation where one person does all the work. For example, one trustee could be entrusted with the insurance portfolio and another can be responsible for maintenance.
Trustees must understand the consequences of their control and management of the scheme, Schaefer says. If a trustee is found guilty of gross negligence, he or she can be held personally liable for the financial damages, he says.
Schaefer says the management rules state that every trustee is indemnified by the body corporate against all costs, losses and claims incurred unless they are incurred by the gross negligence of that trustee.
Trustees are often on the receiving end of much abuse and criticism from owners who do not fully understand where a trustee's duty begins and ends, Schaefer says, remembering that owners themselves have duties in terms of the Act and management rules.
Published on the web by Personal Finance on May 6, 2006.
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