A Paddocks Sectional Title Lifestyle Blog
The trustees in sectional title schemes are elected at the annual general meeting (“AGM”) and very often the same people are elected year after year. Even if new trustees are elected there is usually someone who has been a trustee before and knows the ropes. It is possible though, that an entirely new board of trustees is elected. In this article, we will look at the basics that these new, inexperienced trustees need to know, especially if the body corporate does not employ a managing agent and is self-managed
1. Get educated
To manage a scheme effectively and legally, the trustees need to be pretty familiar with the Sectional Titles Schemes Management Act (“the STSM Act”), the scheme’s management and conduct rules and the Sectional Titles Act. Additionally, they need to know the provisions in the Community Schemes Ombud Service Act regarding dispute resolution, the Community Schemes Ombud Service “the CSOS” levy and the CSOS regulations on duties of scheme executives and fidelity insurance.
There is a host of other legislation they need to know about, some of it in detail. The local municipal by-laws, and occupational health and safety and labour legislation all spring to mind.
The trustees need to have ready access to the scheme’s records, particularly the financial and maintenance records, the sectional plans and the minutes of previous and future meetings.
2. Make sure the annual contribution is raised properly
A vitally important task the trustees must complete very soon after they are elected at the AGM is to meet, elect a chairperson and take the trustee resolution raising the annual contribution. The members must be notified in writing of their liability to pay the contribution within 14 days of the AGM. If the trustees do not take this resolution, the members are not legally liable to pay the contribution and it will not be possible for the body corporate to recover arrears from members who do not pay.
3. Your duty is to the body corporate
The STSM Act provides that the trustees have a fiduciary relationship to the body corporate. While the body corporate is made up of the owners in the scheme, it is a legal entity separate from them and it is to this entity that the trustees owe their fiduciary duties of skill, care and diligence, not to the individual members. The trustees’ test of what they do is always, “is this in the best interests of the body corporate?”
4. Do not use your position to further your own interests
As most trustees are volunteer owners, the STSM Act protects them from personal liability for ordinary mistakes and requires the body corporate to indemnify them from any loss or expense they suffer while doing their trustee duties, except for breaches of their fiduciary relationship to the body corporate.
However, if the body corporate loses money, or a trustee benefits economically because of something the trustee did that was in breach of their fiduciary relationship to the body corporate, that trustee is personally liable for the loss the body corporate suffered, or must pay to the body corporate the economic benefit they made.
5. Act only within the powers of the trustees
The trustees perform the functions and exercise the powers of the body corporate. The STSM Act lists these functions and powers – and of course also makes a catch-all “whatever else is reasonably necessary” provision, but the functions and powers of the body corporate are specific and limited to the control, management and administration of the common property for the benefit of all owners. The trustees must therefore be very careful not to do anything that is outside of these listed functions and powers or outside the spirit of those functions and powers. For example, one of the common abuses of body corporate power that trustees make is in authorising operations that constitute improvements to the common property without the input of the members.
Please contact Paddocks on email@example.com or 021 686 3950 for information on short courses, books, eBooks and advice on legally managing a sectional title scheme or home owners’ association.
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