Breaking Down Trustee Governance - A Guide To Duties Of Trustees
Category Sectional-title Advice
Trustees are the elected representatives of the owners in a sectional-title scheme who are entrusted to manage the scheme in good faith and with its best interest in mind. The duties they perform are required by law, and as such, legally binding.
All the owners in a sectional-title are referred to as the Body Corporate and it is their responsibility to select a group of owners who will manage the scheme's finances, general upkeep and long-term maintenance on behalf of the Body Corporate. This select group of owners are known as trustees and are chosen at the Annual General Meeting (AGM). The trustees then go on to appoint a chairman as their "leader" or manager of the group. The integral role of trustees is discussed in great detail in 2011 promulgated Sectional Titles Scheme Management Act.
Titles Scheme Management Act
It is important to note that the board of trustees can also consist of non-members of the Body Corporate. The Sectional Titles Schemes Management Act states that "a trustee need not be a member", while the Prescribed Management Rule indicates that "a member may nominate any person for the office of trustee". However, if a Body Corporate employs the expertise of a managing agent, this agent and their employees may not be elected as a trustee.
What does a trustee do?
The roles and responsibilities of trustees are broad and can get confusing to those who do not fully understand the topic. Put simply, their tasks revolve around financial management, maintenance management, setting up funds for upkeep, record-keeping, and promoting an understanding of the rules.
Let's unpack this further:
1. Financial Management
Every owner in a sectional-title pays levies each month-this is collected, kept in a fund and used towards building insurance and the upkeep of the building. It is the responsibility of the trustee to manage these finances in the following ways:
- Check that each owner pays levies towards the monthly running costs of the scheme;
- Ensure that levies are banked and used correctly;
- Ensure that owners who are in arrears bring their account up-to-date;
- Ensure that budgeted expenses are not exceeded;
- Check that the scheme is adequately insured so that the owners' investment is not at risk when disaster strikes; and
- Prepare and present financial statements and reports at the AGM: This needs to include an itemised estimate of the income and expenses of the Body Corporate during the upcoming year. It includes anticipated costs related to the 10-year maintenance plan.
2. Maintenance Management
It is the trustees duty to safeguard the scheme's common areas against depreciation and neglect. As such, they need to ensure that common areas are:
- Always in good repair and does not depreciate in value;
- Always cleaned, maintained well, and security measures are implemented
3. Setting up Funds
It is the duty of trustees to store vital accounting records of the scheme. Records need to be up-to-date and correct at all times. Any trustee or Body Corporate member is entitled to inspect these records.
5. Promote an understanding of rules
Rules and regulations are the cornerstones to a well-managed sectional-title and as a result, need to be followed by every resident living in the building. With this in mind, trustees need to ensure that:
- Owners and their tenants abide by the rules as determined by the owners of the sectional-title; an
- Each trustee and managing agent abides by the Sectional Titles Act and Sectional Titles Schemes Management Act.
Acting in Good Faith
While trustees are performing these tasks, they need to do so in a manner that upholds integrity. They should not be in a position which allows them to personally gain from the scheme, however, trustees who are members of the Body Corporate can be remunerated if it is authorised by a special resolution of owners.
When it comes to duties, the trustee needs to act in good faith, make decisions and exercise discretionary powers that are advantageous to all the other owners, and always aim to avoid any conflict of interests between personal and Body Corporate interests. If a trustee is found guilty of misconduct, they will be held responsible to the owners.
Being a trustee is a big responsibility that takes up a lot of time. Even if you have great management skills, the tasks can be too demanding at times. Therefore, many sectional-titles choose to employ the expertise of a trusted managing agent.
Author: De Lucia Group