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Friday Oct 03, 2014

Trustee role often underestimated

Many trustees in sectional title schemes are elected to do the all-important job of managing the finances and scheme itself without ever being trained or being given all the materials needed to do so.

It is a job that is often underestimated in the time and effort it takes to carry out successfully, and is done without payment of any kind (although they will be reimbursed for expenses incurred).

The board of trustees is elected by the members of the scheme and they are mandated to manage the funds and affirm rules and policies within the scheme, , says Mandi Hanekom, operations manager of the sectional title finance company Propell.

'Every trustee should be given copies of the Registered Management Rules, the conduct or house rules, a copy of the Sectional Titles Act and the Amendments Act, and the sectional plan of the scheme so that they can acquaint themselves with the way the scheme must be run. More importantly, they should have the ability to keep calm and think logically as there might be instances where their task might become challenging,' said Hanekom.

The first thing the newly elected trustees should do is hold a trustees meeting, where the points of business such as the levy budget for the next year is established, and pass a resolution for this budget. If there is no resolution the levies cannot be collected legally and if there were ever to be a dispute regarding the payment of levies, most courts would rule against the body corporate.

The powers that the trustees have are governed by the Sectional Titles Act and the rules of scheme. The roles of trustees are to:

  • appoint agents and employees, including a managing agent if it is necessary;
  • borrow funds for the performance of their functions (if the amount needed is large and is preferred to raising a special levy) and give security for such loans, including the cession of levies;
  • purchase or rent items such as lawnmowers, tools, etc., needed for the body corporate;
  • establish and maintain recreation facilities, gardens and lawns on the common property wherever practical;
  • invest funds not immediately required;
  • obtain services by contracting with various service providers, e.g. garden services, painters, electricians, etc;
  • let (for the benefit of the body corporate) parts of the common property to owners and occupiers, such as parking bays;
  • gain access to sections and exclusive use areas for maintenance purposes; and
  • delegate duties to individual trustees where necessary.

    Trustees must perform the functions necessary in order to manage the scheme well, said Hanekom. These are:

  • 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 and making sure that it is for an adequate amount (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 conduct rules;
  • arranging and conducting the AGM and, when necessary, special general meetings; and
  • preparing the documentation to be presented at each AGM, including the budget and audited financial statements.

    Trustees must keep proper financial records for the scheme. All monies received or spent by them must be recorded and proper financial statements must be prepared and audited by a professional accounting firm. It is of utmost importance that these documents be signed by the trustees and auditor.

    'The body corporate finance function should be dealt with as any business would. There are often large sums of money being paid over, and the enormity of the financial responsibility to keep these funds in good hands is often underestimated,' said Hanekom.

    Apart from dismissal by the members of the scheme, a trustee is automatically removed from office under the following circumstances:

  • when his levies are in arrears for 60 days;
  • if he tenders his resignation;
  • if legally declared to be of unsound mind;
  • if he is sequestrated; or
  • if convicted for an offence involving dishonesty.

    It goes without saying that any person subject to any of the above disqualifications may not be appointed as trustee in the first place, said Hanekom.

    'The role of trustees within a body corporate is a very important one, and one that is crucial to the wellbeing of the scheme. A good board of trustees will be able to ensure that the scheme yields positive financials while running it effectively and smoothly, while keeping the occupants happy,' said Hanekom.

    Propell Press Release

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