So you have been elected as a trustee of a Body Corporate for the first time! Congratulations!
The members of your Body Corporate obviously have confidence in your integrity and ability.
You may have less confidence in yourself, suspecting you don’t know nearly enough about Body Corporate management. Rest assured – you are not the only one with this inner doubt!
The world of sectional title management is complex, dynamic and challenging. It also becomes more interesting, the deeper you delve.
The basic tools for your task as a trustee are: - A copy of the Management Rules; - A copy of the Conduct Rules; and - A healthy dose of common sense and a cool head.
If your Body Corporate does not have copies of the above documents on file, your first action would be to get your hands on them! Take note that while the Sectional Title Schemes Management Act, Act 8 of 2011 (herein referred to as the Act) contains Standard Management Rules and Standard Conduct Rules, these may have been amended for your scheme. The true state of affairs can be ascertained at the Deeds Office or the Community Schemes Ombud Service. A copy of the Act (plus the Standard Rules) may be obtained from publishers such as Jutas or Butterworths.
WHERE IT ALL BEGINS A Sectional Title Development, called a scheme, starts when an owner of land or a building (developer) decides to develop a property in terms of the Sectional Titles Act, Act 95 of 1986. When the developer transfers the first unit in a new scheme to a purchaser, a Body Corporate (association of owners) automatically comes into being. Every newly registered owner automatically becomes a member of that scheme’s Body Corporate and is a trustee until the first election of trustees.
THE ROLE IN A NUTSHELL
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 members, may be dismissed by members, must heed the instructions and limitations imposed by members and all their actions are subject to the Act and the Rules. It follows that trustees are expected to familiarize themselves with the contents of these.
Trustees must always maintain the utmost good faith towards the members. Trustees are elected not to promote their private interests but to serve the Body Corporate and to act in the best interests of the members in general. Trustees must ensure that the provisions of the Act and the Rules are applied meticulously. Trustees 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, fraudulent or wilful.
ELECTING TRUSTEES At the first general meeting of owners, and subsequently at every AGM, new trustees are elected, although previous trustees are eligible for re-election.
FIRST THINGS FIRST The trustees cannot function until they have had their first meeting as a new board. At this meeting, the first thing they need to do is to elect a chairperson. This person will also be the chairperson of the Body Corporate at General Meetings. Then the trustees need to make a resolution determining the levies for the next year. This does not mean they have discretion as to the amount or apportionment of the ordinary levies. The total amount will have already been determined in the budget as set out at the AGM and the apportionment must be made in accordance with the Participation Quota of each owner (in the case of the majority of Bodies Corporate). The trustees only need to calculate the apportionment of that total amount as per the budget, prepare a schedule of apportionment and ratify it by making a trustees resolution in this regard. And make sure the election of the chairperson and determination of levies are recorded in the minutes of the trustees’ meeting. No trustees’ resolution means no levies determined and payment cannot be enforced in a Court of Law.
TRUSTEES’ MEETINGS Trustees, including the chairperson, cannot act individually, but only in terms of proper trustees’ resolutions. The chairperson does NOT have the power to make any decisions on his/her own! Once the Board of trustees has resolved to do something, the job may be delegated to individual trustees. For example if the trustees wish to enter into a contract with a security firm, a resolution to such effect must first be made. The same resolution should state who will carry out the negotiations (minimum of two) and sign the contract.
Trustees should meet in order to make appropriate resolutions however a written resolution signed by all trustees is accepted as a valid trustees’ resolution. All resolutions must be minuted.
THE CHAIRPERSON The trustees will elect their own chairperson at the first meeting after the AGM. He/she will also serve as chairperson at General meetings of the Body Corporate. However the members at a General Meeting may appoint another person as chairperson for that particular meeting. If, at a trustees’ meeting, the chairperson is absent or vacates his/her chair for some reason, the trustees must appoint an acting chairperson for that meeting only. If the chairperson is absent at a General Meeting, not present within 15 minutes from the start, vacates the chair or is unable to chair the meeting, the members present must elect a chairperson for that particular General Meeting. The trustees may dismiss their chairperson at any time by majority resolution of the trustees. Owners may also dismiss the chairperson at a Special General Meeting. In both instances, notice of the intended dismissal must be given otherwise the dismissal would be procedurally incorrect and may be challenged. A chairperson may resign as chairperson yet remain a trustee.
NOTICE OF MEETINGS Any trustee can arrange a meeting at any time providing no less than seven days written notice is given to all trustees. The reason for the meeting must be given in the notice. If there is a need for an urgent meeting, shorter notice may be given. It is not necessary to give notice to a trustee who happens to be outside the RSA, but if the Board of Trustees has appointed a substitute, that person must be notified.
ATTENDANCE AT MEETINGS All trustees present at the meetings are allowed to speak and vote. If a trustee is absent or unable to act then the Board of Trustees may choose someone to substitute for him/her. Owners do not have the right to attend trustees’ meetings but can be invited to the attend meetings but only for the matters that relate to them. It is not necessary to notify owners of trustees’ meetings unless the members have instructed that this be done at a General Meeting.
MINUTES OF MEETINGS It is essential that reliable minutes be kept of all trustees’ meetings (and General Meetings). The trustees could appoint a secretary for this task if someone is available. If a managing agent is appointed they would normally attend to the keeping of minutes.
VOTING BY TRUSTEES The majority of votes cast by the trustees decides all matters. Each trustee has one vote. The vote may be cast for or against any motion. If there are more than two trustees, in addition to his/her deliberative vote, the chairperson has a casting vote. The chairperson can only exercise his/her casting vote if the deliberative vote including his/her own is tied. The chairperson has a casting vote only at trustees’ meetings, not at General meetings.
CONDUCT OF MEETINGS Trustees will schedule and conduct meetings as and when required. Because they deal with day-to-day matters they normally have less formal meetings. The chairperson controls the meeting according to the Rules and/or according to the traditional procedures of meetings.
REPRESENTATION AT MEETINGS All trustees are entitled to be present, contribute and vote at every trustees’ meeting. Never exclude one or more trustees from a trustees’ meeting; the meeting will not be properly constituted and any action taken may be set aside. The above does not apply in respect of any trustee being outside the country at the time.
QUORUM REQUIREMENTS
A quorum is the minimum number of trustees who must be present for meetings to take place and for valid decisions to be made. There must be at least 50% of the total number of appointed trustees, with an absolute minimum of two.
A proxy cannot be used to represent an absent trustee because a trustee cannot delegate his functions to a third party. However a co-opted trustee, or duly appointed substitute, is counted for quorum purposes.
If a quorum is not present at a trustees’ meeting after 30 minutes have passed from the scheduled time of the meeting, the meeting must be postponed to the next business day at the same time.
The trustees then present will be deemed to form a quorum. No valid resolution can be adopted by trustees without a quorum (or deemed quorum).
If the number of trustees fall below the number required for a quorum, the present trustees cannot conduct any business, except to co-opt additional trustees, who must serve until the election of new trustees at the next AGM.
REMOVAL OF TRUSTEES The trustees themselves do not have the power to remove or dismiss a trustee from office. Nor may they exclude a particular trustee from meetings. Only the members at a General Meeting may dismiss a serving trustee. They do not have to show any particular reasons for such removal. If owners intend to dismiss a trustee from office, it is essential that this be mentioned in the notice of a General Meeting. A trustee cannot challenge his/her dismissal, except upon the grounds of incorrect procedures. 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 offense involving dishonesty.
RULES:
MANAGEMENT AND CONDUCT Every Sectional title scheme is automatically subjected to a set of rules once the scheme is first registered. These rules may be the Standard Rules or rules specially amended for that particular scheme. The Standard Rules are contained in Annexures 1 and 2 of the Sectional Title Schemes Management Act, Act 8 of 2011. The developer determines the initial rules although these subsequently may be amended by the owners. There are two sets of rules: Management Rules that relate to matters such as the election, duties and functions of trustees, records and accounting, determination of levies, insurance, general meetings and arbitration. Conduct Rules that relate to the everyday do’s and don’ts of owners and occupiers, such as keeping of pets, parking, laundry and selling of units. So called “House Rules” have no standing in sectional title schemes, cannot be enforced and should be avoided. Management Rules may only be amended by Unanimous Resolution and Conduct Rules by Special Resolution. *A Unanimous Resolution is one in respect of which proper notice was given, a special quorum of 80% is present (or represented) and is adopted unanimously. (For the purposes of a Unanimous Resolution only, an abstraction is to be regarded as a vote in favour of the proposed resolution.) * A Special Resolution only requires an ordinary quorum, but 75% of members present or represented must vote in favour. The Body Corporate may amend the Rules from time to time as does the legislator. It is often difficult to determine whether such amendments apply to your own Body Corporate. The rule of-thumb is that they do unless your Body Corporate has previously made special rules., which cover that particular subject. No amended rule may be unreasonable or in conflict with provisions of the Act. No amended Conduct Rule may be irreconcilable with any provision of the Management Rules. Rules apply to all owners and all occupiers and must be enforced by the trustees to the best of their ability. Enforcement can often be a problem and expert advice should be sought in this regard from a specialist when necessary. It is important that, when certain procedures are subscribed by the Rules, trustees follow them to the letter.
TRUSTEE POWERS: 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: The trustees must—
(a) meet to carry out the body corporate's business, adjourn and otherwise regulate their meetings as they think fit, subject to the provisions of the Act, these rules and the common law of meetings;
(b) exercise the body corporate's powers and functions assigned and delegated to them in terms of section 7(1) (Directions or Restrictions) of the Act in accordance with resolutions taken at general meetings and at meetings of trustees;
(c) apply the body corporate's funds in accordance with budgets approved by members in general meeting;
(d) appoint any agent or employee in terms of section 4(a) of the Act in terms of a duly signed written contract; and
(e) compile minutes of each trustee and general meeting and distribute these to the persons entitled to notice of the meeting concerned as soon as reasonably possible, but not later than 7 days after the date of the meeting.
BOOKS OF ACCOUNT AND FINANCIAL STATEMENTS: Trustees must keep proper books of account. All monies received or spent by them must be recorded. Proper financial statements must be prepared and audited by a professional firm. It is the Trustees obligation to forward copies of the proposed Budget, chairperson’s report and financial statements to all members with the AGM notice. An owner, or any person authorized by him in writing, may inspect the books of account, financial statements, records and minutes of the Body Corporate.
SIGNING OF DOCUMENTS:
Every ‘instrument’ signed on behalf of the Body Corporate such as a contract, power of attorney requires the signature of two trustees.
CONVENING GENERAL MEETINGS: The procedures to convene general meetings are explained in Sectional Title Schemes Management Act, Act 8 of 2011, Prescribed Management Rules 15 to 20. There are two types of general meetings: - The Annual General Meeting (AGM) when the accounts are presented and trustees elected. - A Special General Meeting where a specific resolution may be presented at a time between AGMs. This may be convened by the trustees whenever they think fit. The owners, on the other hand, may request the trustees to convene a General Meeting. This request must be in writing and be supported by 25% of the owners calculated in value. Notice of a General Meeting must be sent to all owners (and bondholders who have advised the Body Corporate of their interest). Inadvertent omission or non-receipt of such notice will not invalidate any proceedings at any such meetings. In the case of an AGM, certain items must appear on the Agenda in terms of the Management Rules: - The Financial Statements - Chairperson’s Report and Maintenance plan - Insurance Schedules - Budget - Appointment of Auditors - Determination of the Number of Trustees For the Year Ahead - Election of Trustees - Directions (Instructions) or Limitations upon the Activities of Trustees (if applicable) - Special Business (of which notice was given). If a quorum is not present at a General Meeting within 30 minutes of the appointed time, the meeting must be adjourned for one week, same place and same time. The members then present will be deemed to form a quorum, but NOT for the purpose of a Unanimous Resolution.
VOTING: Voting is decided by value (Participation Quota). For any resolution other than a Unanimous or a Special Resolution to be passed, a 50% plus one majority is required. Voting may be conducted in person or by proxy, which must be in writing. The chairperson has no deliberative (deciding) vote at General Meetings and may not influence the voting in any way. In the case of a Special Resolution, voting is counted by number and also by value (Participation Quotas). Only in the event of an ordinary resolution, owners whose levies are not fully paid up or who persist in contravening the Conduct Rules are not entitled to vote.
CONSENTS BY TRUSTEES There is a serious misconception that trustees have the power to consent to just about anything such as the erection of structures or installations on common property, even the extension of sections. This is simply not so! Unfortunately this pervasive practice leads to costly rectifications, litigation, disputes, losses for the Body Corporate and erosion of the market value of units. In terms of the Act and the Rules, trustees have certain limited abilities to grant consents. ONLY for: - The erection by an owner of a structure or improvement on his legitimate exclusive use area. - The keeping of pets - Parking n common property - Minor changes to common property such as painting or fixing screws or nails - The design and specifications of external burglar bars and similar items - The display of notices and advertisements - The erection of washing lines All consents must be issued in writing.
THE MANAGING AGENT The appointment of a managing agent can hold distinct benefits for a Body Corporate. By improving the standard of management, the presence of a managing agent can result in overall cost savings. It is important to require references to ensure the proposed managing agent is reputable. It is equally important to remember that the one with the cheapest quote may not necessarily be the one to render a efficient service, which could easily cost the Body Corporate more in the long run. The trustees have the discretion to appoint a managing agent. Or the members may, by ordinary resolution, decide to appoint a managing agent and the trustees would then be compelled to do so. The duties and compensation of the managing agent should be negotiated between the trustees and the candidate in fine detail, and must be recorded in a written contract. The Management Rules contain a number of requirements in this regard and should be consulted and applied by the trustees.ext here
