Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

For the record: body corporate responsibilities

paddocks_bc_responsibilities

By Dr Carryn Melissa Durham

Administering a sectional title scheme can involve some major paper pushing. The trustees have a duty to maintain the records on behalf of the body corporate. There are various documents that need to be prepared, stored and made available for inspection. This article will set out the records that the trustees are obliged to keep.

The rules

In terms of prescribed management rule (“PMR”) 32(1), the trustees must keep a complete record of all rules in force, and must ensure that any amendment, substitution, addition or repeal of such rules, as contemplated in section 35(5) of the Sectional Titles Act 95 of 1986 (“the Act”), is submitted to the relevant Registrar of Deeds for filing as contemplated in section 35(5)(c) of the Act.

In terms of PMR 32(2), the trustees must supply a copy of the rules in force to the following persons on their application:

  • an owner of a unit;
  • an occupant of a unit;
  • the prospective purchaser of a unit;
  • the holder of any registered sectional mortgage bond;
  • the managing agent; and
  • the auditor or the accounting officer.

The trustees may require the applicant to pay a reasonable administrative charge for supplying a copy of the rules.

The minutes

In terms of PMR 34(1), the trustees must keep minutes of their proceedings; as well as minutes of all meetings of the body corporate in a minute book. A record of every unanimous resolution, special resolution and any other resolution of the body corporate must also be kept in the minute book.

In terms of PMR 34(2), the trustees must keep all minute books in perpetuity – this means for the duration of the scheme’s existence. Furthermore, on the written application of any owner or registered mortgagee of a unit, the trustees must make all minutes of their proceedings and the minutes of the body corporate, available for inspection by any owner or mortgagee.

In terms of PMR 49(2), the trustees must furnish the managing agent with copies of the minutes of all meetings of the trustees and of the body corporate.

Books of account and records

In terms PMR 35(1), the trustees must keep proper books of account and records so as to fairly explain the transactions and financial position of the body corporate. These books of account and records include:

  • A record of the assets and liabilities of the body corporate (balance sheet).
  • A record of all sums of money received and expended by the body corporate and the matters in respect of which such receipt and expenditure occur (income statement).
  • A register of owners and of registered mortgagees of units and of all other persons having real rights in such units (insofar as written notice was given to the trustee by such owners, mortgagees or other persons) showing in each case their addresses.
  • Individual ledger accounts in respect of each owner.

In terms of PMR 35(3), the trustees must retain all books of account and records for a period of six (6) years after completion of the transactions, acts or operations to which they relate.

In terms of PMR 35(2), the trustees must make all or any of the books of account and records available for inspection on the application of any owner, registered mortgagee or of the managing agent. Additionally the body corporate has the duty to comply with any reasonable request for the names and addresses of the persons who are the trustees of the body corporate, or who are members of the body corporate in terms of section 37(1)(l) of the Act.

Annual financial estimate, financial statement and chairperson’s report

In terms of PMR 36, the trustees must, prior to the commencement of each financial year, prepare (or cause to be prepared) the following documents:

  1. An itemised estimate of the anticipated income and expenses, including reasonable provision for contingencies and maintenance of common property (a budget) for the ensuing financial year.
  2. A financial statement that fairly presents the financial position of the body corporate in conformity with generally accepted accounting practice. This statement must include a debtors and creditors age analysis of the body corporate.
  3. A schedule reflecting their estimate of the replacement value of the buildings and all improvements and of each unit, and a statement setting out the expiry dates of all insurance policies.
  4. A report signed by the chairperson reviewing the affairs of the body corporate.

The insurance schedules, budget, audited financial statement and trustees’ report must be delivered to each owner at least fourteen (14) days before the annual general meeting for consideration and approval by the body corporate.

Finally, the trustees must, on behalf of the body corporate, produce to any owner or mortgagee, or any person authorised in writing by such owner or mortgagee, on their written request, the policy or policies of insurance effected by the body corporate and the receipt or receipts for the last premium or premiums in respect thereof in terms of section 37(1)(q) of the Act.

If you have any queries with regard to the records of the body corporate, please contact us at consulting@paddocks.co.za.

Image source: inbofida.com

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10 comments on “For the record: body corporate responsibilities

  1. Heidi Russell
    July 27, 2016

    Good day

    Are there any adminstrative account records that the Management Agent can withhold from the Trustees? Example the City of Cape Town invoices stating the monthly meter reading and unit cost thereoff.

    Thank you for any clarity on this point.

    • Paddocks
      July 29, 2016

      Hi Heidi,

      The trustees are entitled to all body corporate related records including municipal account.

      Regards,
      Paddocks

  2. Emlyn
    June 23, 2016

    Good day

    I would like to please find out how many months after the financial year end must the agm be held? What happens if its held 9 months after the financial year end

    Thank you

    • Paddocks
      June 24, 2016

      Hi Emlyn,

      Prescribed Management Rule 51(1) of Annexure 8 of the Regulations to the Sectional Titles Act 95 of 1986, provides that an AGM shall be held within 4 months of the end of each financial year. Some bodies corporate are forced to hold this meeting later for justifiable reasons, for example the annual financial statements have not yet been prepared.

      Regards,
      Paddocks

  3. Monica
    June 23, 2016

    The phrase “must make records available for inspection” is misleading as it does not refer to obtaining copies of these documents. Our managing agent and trustees recently refused me copies and I had to take the drastic step to apply for copies by completing PAIA documents . After waiting for 4 weeks I was given only certain information, the rest were omitted. It will be interesting to know if the new Sectional Title Schemes Management Act will address what may be deemed a loophole in the information providing process?
    The chairman’s report is often used as a tool to attack rather than inform. 25% of owners recently called an SGM after the end of the financial year and shortly before the AGM was held. The meeting did not go the chairman’s way and he provided a slanted picture in his report to owners before the official minutes of the SGM were published. Not only did he hoodwink owners who did not attend the SGM but his report covered portion of the new financial year. Surely his report should coincide with the financial year during which he was chairman? Or is it common practice to cover the interim period between the end of the financial year and the AGM too?

    • Paddocks
      June 24, 2016

      Hi Monica,

      Currently under the Sectional Titles Act 95 of 1986, there is no obligation on the body corporate to provide copies of body corporate records, but only the obligation to make these records available for inspection. Copies can be made by agreement with the body corporate or managing agent. With regard to the chairman’s report, it is common practice that this report cover all body corporate affairs during the term of office of the outgoing trustees.

      Regards,
      Paddocks

  4. Valerie Thompson
    June 23, 2016

    Thank-you so much for this extremely valuable article. I have one query i.r.o the third bulleted point under Books of Account and Records; “insofar as written notice was given to the trustee(s) by such owners ,mortgagees or other persons”. Does this mean that the parties having real rights must advise the trustees of their rights , in writing,otherwise they and their addresses are not entered in the register? Please correct me. Best wishes.

    • Paddocks
      June 24, 2016

      Hi Valerie,

      As part of the registration on the right, referred to in the management rule, the body corporate will be made aware of such right as well as the holder of the right.

      Regards,
      Paddocks

  5. liesljoubertgmailcom
    June 23, 2016

    Do you think that a scheme could go completely paperless, i.e. keep all records (including minutes) somewhere in “the cloud” instead of having paper copies?

    • Paddocks
      June 24, 2016

      Hi Liesl,

      Under the current Sectional Titles Act 95 of 1986 this would not be possible. For example Prescribed Management Rule 34(1) of Annexure 8 of the Regulations to the Act, refers to a minute book to be kept in perpetuity.

      Regards,
      Paddocks

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