The role of trustees within a body corporate
Every Sectional Title Scheme in South Africa is mandated to elect a board of trustees – these elected individuals direct the funds and affirm the policies of the scheme. Yet often the role of these trustees is misunderstood, thus leading to serious repercussions both legally and financially for the scheme. Hopefully the pointers below can help individuals understand the role that trustees should play.
First and foremost – the basic tools for the task of a trustee are:
- A copy of the Registered Management Rules
- A copy of the Conduct Rules or House Rules
- A copy of the Sectional Titles Act
- A copy of the Sectional Plan for your scheme
- A healthy dose of common sense and a cool head
If your Body Corporate does not have copies of these documents on file, your first action would be to get your hands on them! The Act requires that all executive functions and powers of a Body Corporate are performed by the trustees. This does not mean they are the highest authority. They are elected by the owners and may be dismissed by the owners. They must heed the instructions and limitations imposed by owners and all their actions are subject to the Act and the Rules.
Trustees of a body corporate act voluntarily and without compensation. They are only liable for losses or damages incurred by the Body Corporate if they act in a manner that can be described as grossly negligent or fraudulent. After the trustees’ election at the AGM, the trustees need to hold their own Trustee meeting where one of their first points of business will be to approve a resolution determining the levies (approved by the owners at the AGM) for the next year. No trustees’ resolution means no levies determined and payment cannot be enforced in a Court of Law!
In order to perform their functions or duties trustees are endowed with certain powers.
These powers are not unlimited and are strictly circumscribed by the Act and the Rules, as well as by instructions or restrictions imposed by members at a General Meeting. Very briefly, trustees can perform the following actions:
- Appoint agents and employees, including a managing agent
- Borrow funds for the performance of their functions and give security for such loans, including the cession of levies
- Purchase or rent items such as lawnmowers, tools, etc needed for the BodyCorporate
- Establish recreation facilities, gardens and lawns on the common property where practical
- Invest funds not immediately required
- Obtain services by contracting with various service providers
- Provide services by contracting with owners and occupiers
- Let (for the benefit of the Body Corporate) parts of the common property to owners and occupiers
- Gain access to sections and exclusive use areas for maintenance purposes
- Delegate powers and duties to individual trustees
Trustees must perform the following functions necessary for the good management and administration of the Body Corporate:
- Determining, collecting and administrating levies in respect of sections and exclusive use areas
- Opening and maintaining a bank account
- Insuring all building improvements including sections (but not their contents)
- Maintaining common property (including exclusive use areas)
- Keeping minutes
- Keeping and administrating all records, including financial records of all Body Corporate transactions
- Keeping a record of the current Rules
- Arranging and conducting the AGM and, when necessary, special general meetings
- Preparing the documentation to be presented at each AGM, including the Budget and audited financial statements
Trustees must keep proper books of account for the Scheme. All monies received or spent by them must be recorded. Proper financial statements must be prepared and audited by a professional firm. It is of utmost importance that these documents be signed by the Trustees and Auditor.
Apart from dismissal, a trustee is automatically removed from office under the following circumstances:
- Upon written resignation
- If legally declared to be of unsound mind
- Upon his/her sequestration
- Upon conviction for an offence involving dishonesty
It follows that a person subject to any of the above disqualifications may also not be appointed as trustee in the first place.
The role of trustees within a body corporate is a very important one, and one that is very beneficial to the well being of the scheme. A good board of trustees will be able to ensure that the scheme yields positive financials whilst at the same time runs effectively and smoothly keeping tenants and owners happy.