What power or authority do trustees hold in sectional title schemes?
By Dr Carryn Melissa Durham
I often answer questions on what trustees are empowered to do in exercising their functions in sectional title schemes. The powers of the trustees are clearly set out in the Sectional Titles Act 95 of 1986 (“the ST Act”); the Sectional Titles Schemes Management Act 8 of 2011 (“the STSM Act”) and the Prescribed Management Rules (“PMRs”) contained in the Regulations made thereunder. Something that is not clear though is whether that power needs to be supplemented by some other additional authority before the trustees can exercise the power.
9 powers that trustees have in sectional title schemes
Section 4 of the STSM Act gives the trustees the power to:
- Appoint agents and employees for the body corporate.
- Purchase, acquire, take transfer of, mortgage, sell, give transfer of or hire or let units.
- Purchase, hire or otherwise acquire movable property.
- Establish and maintain suitable lawns, gardens and recreation facilities on the common property.
- Borrow moneys.
- Secure the repayment of moneys borrowed and the payment of interest thereon;
- Invest any moneys in the reserve fund.
- Enter into an agreement with any owner or occupier for the provision of amenities or services by the body corporate, including the right to let a portion of the common property to any owner or occupier by means of a short-term lease.
- Do all things reasonably necessary for the enforcement of the rules and for the management and administration of the common property.
9 additional powers of the trustees in sectional title
Section 5 of the STSM Act gives the trustees the power to:
- Alienate common property or any part thereof, or let the common property or any part thereof under a lease.
- Alienate or cede a right of extension of the scheme by the addition of sections;
- enter into a notarial agreement to extend the period stipulated in the future development right of the scheme.
- Purchase land to extend the common property.
- Request the delineation and cession of registered exclusive use rights to particular owners.
- Enter into a notarial deed of cancellation of a registered exclusive use right.
- Execute on behalf of the owners a servitude or a restrictive agreement burdening the land shown on the relevant sectional plan and may accept on their behalf a servitude or restrictive agreement benefiting such land.
- Approve the extension of boundaries or floor area of a section.
- May generally exercise any power and perform any function conferred or imposed on the body corporate in terms of the STSM Act or the ST Act.
Almost all of these powers are subject to some condition and additional required authority from the body corporate, such as:
- The trustees can only purchase a unit when it is essential for the proper fulfilment of its duties and upon special resolution of the body corporate.
- The trustees can only borrow money or let a portion of the common property by means of a short-term lease; cancel a registered exclusive use right; register a servitude or enter into a restrictive agreement; or approve the extension of a section if the body corporate passes a special resolution.
- The trustees can only enter into a notarial agreement to extend the future development right or request the delineation and cession of exclusive use rights to particular owners if the body corporate pass a unanimous resolution thereto.
- The trustees can only alienate or let common property on the strength of unanimous resolution of the body corporate, and on direction by the owners and with the written consent of any holder of a future development right.
- The trustees can only alienate or cede a right of extension of the scheme with the written consent of all the owners and the mortgagee of each unit in the scheme.
- The trustees may only purchase land if duly authorised in writing by all the owners.
An additional power that the trustees have, contained in section 7(2) of the STSM Act, is that the trustees of the body corporate must consider applications for subdivision of sections or consolidation of sections, made by the owners of sections and such consent must not be unreasonably withheld by the trustees.
Restrictions to trustee power
It is also important to note that all the functions and powers of the trustees are subject to any restriction imposed or direction given at a general meeting of the owners in terms of section 7(1) of the STSM Act and PMR 9(b). For example, the trustee might have the power to purchase movable property such as a gym equipment, but there may be a restriction on the amount of money that can be spent by the trustees, or a direction to rather purchase a generator.
The trustees ability to exercise any powers will also always be subject to the approved budget of the body corporate. PMR 9(c) requires that the trustees must apply the body corporate’s funds in accordance with budgets approved by members in the general meeting. For example, the trustees will not be able to appoint a managing agent or caretaker for the scheme unless provision is made for this expense in the budget.
Furthermore, none of the powers can be exercised by any single trustee as every decision to exercise a power must be determined by a majority of the trustees. Finally, no document signed on behalf of the body corporate is valid and binding unless it is signed on the authority of a trustee resolution by two trustees or one trustee and the managing agent. For example, a loan from the bank will not be binding on the body corporate, unless it is supported by a trustee resolution supported by the majority of trustees, and that the loan agreement is signed by two trustees.
If you need advice or need Paddocks to draft the necessary resolution to authorise the exercise of a power, please contact me at email@example.com for a no obligations quote.
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