"Those who are ignorant will never know that they are being abused."
So said a British judge in a famous fraud case.
These guide notes have been prepared for Trustees
so that they will be aware of their responsibilities
and realise the importance of
the trust placed in them.
WHAT AND WHO ARE TRUSTEES
A Sectional Title Scheme or Complex, as it is often called, is controlled and managed by a Body Corporate.
A developer or any other person may not, amongst other things, advertise for sale, or sell any unit in respect of any building or and land unless a sectional title register has been opened.
The registrar in charge of the deeds registry in which the land comprised in the scheme is registered shall register the plan and allot a distinctive number to it once the requirements of the Act and any other relevant law have been complied with.
The developer shall be the owner of any sections/units in respect of which the ownership is not held by any other persons, and the quota of such sections shall determine the share of the developer in the overall quota of the common property. Sect 34(1) of the Act
The Body Corporate comes into existence from the date on which any person other than the developer becomes an owner of a unit in a registered scheme. The developer and such persons as registered unit owners and every person who thereafter becomes an owner of a unit shall be a member of the Body Corporate. Sect 36 of the Act
The Body Corporate is responsible for the control, administration and management of the common property for the benefit of all owners.
There may be many units in a sectional title scheme resulting in many owners, in many cases too many owners to form a working committee. This problem is acknowledged by the law makers an provision has been made in the Act for the Body Corporate to appoint Trustees to hold office in terms of the regulations of the Act.
TRUSTEES ARE PERSONS WHO ARE APPOINTED
TO LOOK AFTER THE FINANCES AND RUNNING
OF THE SECTIONAL TITLE SCHEME
ON BEHALF OF THE BODY CORPORATE
|PANIC!!! I HAVE BEEN ASKED TO BE A TRUSTEE|
|HOW TRUSTEES GET THINGS DONE|
|ANNUAL, GENERAL AND SPECIAL MEETINGS|
|HELP!!! WE NEED HELP|
|THE ANNUAL GENERAL MEETING|
|EXTRACTS FROM THE ACT REGARDING TRUSTEES|
|DO's AND DON'TS|
|The Trustees of a Body Corporate are appointed by the owners in a Sectional Title Scheme. They act in a position of trust and manage the affairs of the scheme on behalf of the body corporate.|
|The determination of the number of Trustees and the election of Trustees for the ensuing year is done at the Annual General Meeting.|
|The Trustees appoint a chairman as their "leader" or manager of the group.|
|A Trustee is trusted to act honestly and for the interests of the Body Corporate. They play such an important role that their appointment, duties, and conduct of meetings is dealt with in great detail in the 1986 Act under the statutory management rules, known as Annexure 8 of the Act.|
|These notes have been prepared to give an overview of the Annexure 8 of the Act with respect to the duties of a Trustee.|
YOU AS A TRUSTEE
Annexure 8 of the Sectional Titles Act specifies in great detail who may be appointed as a Trustee, what should be included in the agenda of various meetings and details many more statutory do's and don'ts that affect a Trustee BUT no mention is made of what is expected of a Trustee.
Consider a Sectional Title Complex having, say, 20 Units having cost the each owners R100,000-00.
This means that 20 people have jointly invested R2,000,000-00 in a business. These same people do not have the time nor the business skills to run the business especially as the business is not expected to make a profit. Also the business must not make a loss otherwise the value of the investment will decrease.
Each investor owns the inside of the Unit that he has purchased and jointly owns a share of the common property within the complex. The jointly owned property is known as the "Common Property" and the share is directly in proportion to the "Participation" or the initial area of the complex that the Unit occupies in the whole.
So who and what is a Trustee?
A Trustee is a person or persons appointed by the owners of the various Units in the complex to look after their investment in the complex.
HOW DO I LOOK AFTER THE INVESTMENT ?
The most important duties of a Trustee are to:
|ensure that each owners pays his/her fair share (levy) towards the monthly running costs of the complex,|
|ensure that the moneys received (levies) are banked and used correctly,|
|ensure that owners, who are in arrears, bring their accounts up to date and do not sponge off the goodness of those who keep their payments up to date.|
|ensure that payments as determined by the budget are made as and when required,|
|ensure that the payments as specified in the budget are not exceeded,|
|ensure that the common property is always in good repair and does not depreciate in value,|
|ensure that the Complex is adequately insured at all times so that the owners investment is not ever at risk,|
|ensure that the owners, and their tenants, abide by the rules as determined by the owners of the complex,|
|ensures that he/she and the other Trustees abide by the Sectional Titles Act|
|ensures that the Managing Agents, or any other agents used to assist in the Trustees in their duties abide by the Sectional Titles Act.|
WHAT ARE SOME OF THE OTHER DUTIES OF A TRUSTEE ?
One of the duties of a Trustee is the administration and enforcement of the Rules governing the scheme.
There are THREE sets of rules .
The first two sets of rules are registered with the Registrar of Deeds and form part of the Sectional Titles Act that is applicable to the particular complex.
|SCHEDULE I RULES consists of clauses governing the basic constitution of the Body Corporate and the rights of the individual owners. These rules may be amended only by unanimous agreement of the Body Corporate.|
|SCHEDULE II RULES deal more with the personal behaviour of the members of the Body Corporate. These rules may be amended by a three quarters majority vote by the Body Corporate.|
These first two sets of rules are registered with the Registrar of Deeds and form part of the Sectional Titles Act that is applicable to the particular complex.
|THE HOUSE RULES are a set of special rules that deal with particular circumstances relating to the Complex. These rules are made by agreement of a simple majority (50% + 1) of the Body Corporate and may be changed at any time to suit certain circumstances provided the change is agreed to by a simple majority of the members of the Body Corporate. These changes are made at a Special Meeting.|
THE HOUSE RULES:
Deal with situations not covered by the Schedule rules, expand on the Schedule rules insofar as this affects administration procedures, deal with situations of a short term nature that may arise from time to time.
House Rules are as fully enforceable as the Schedule Rules.
You are not alone. All the members of THE BOARD OF TRUSTEES should be equally involved. If a member is not involved then, there is no point in being a member.
One of the House Rules should stipulate that a member of the Board of Trustees who does not attend say 3 out of 5 meetings should be dropped as a Trustee.
PART 2 HOW TRUSTEES GET THINGS DONE
Trustees meet, discuss what has to be done and decide who will do it.
This sounds simple but certain procedures are necessary and have been stipulated by the Act.
Firstly the meeting must be correctly convened, have a quorum and minutes kept and a record kept of Trustees attending the meeting and decisions reached.
The table below summarises the requirements for a meeting to be properly constituted.
IN EVENT OF NO QUORUM
At least 7 days written notice shall be given to Trustees (and any first mortgage holders if they have so requested) convening a meeting.
In the case of urgency shorter notice as is reasonable in the circumstances may be given. Rule 15(1), (2), (3)
50% of Trustees but not less than 2.
The trustees present, who shall not be less than 2, shall form a quorum. Rule 17
If no quorum present after 30 minutes of the appointed time the meeting stands adjourned to the next business day at the same place and same time.
The Act stipulates that the Trustees shall:
|appoint their own chairman, The chairman's duties is to chair the meetings,|
|keep minutes of their meetings,|
|keep all minute books in perpetuity.|
|comply with all facets of the Act.|
Trustees may regulate their meetings as they think fit. Rule 15(1)
MEETINGS OF TRUSTEES
At least 50% of the total number of Trustees must be present to form a quorum for a valid meeting of the Trustees, in no circumstances can only one Trustee hold a valid meeting.
A Trustee cannot be represented at a meeting by a proxy or any other agent.
An alternate Trustee, who does not represent but replaces an absent Trustee, is counted for the purpose of establishing a quorum at a meeting of the Trustees.
If the Chairman should relinquish the office as chairman then the Trustees shall elect another Chairman who shall hold office for the remainder of the period.
If the chairman vacates the chair during the course of a meeting or is unable to preside at any meeting then the trustees present shall choose another chairman for the meeting who shall have the same voting rights as the chairman.
In terms of the Management Rules the Trustees may regulate their meetings as they see fit. Because there are a limited number of Trustees and they deal with practical day-to-day management issues, they are usually able to conduct their meetings far more informally than general meetings of the Body Corporate.
We offer the following information based on experience gained from some of the Sectional Title Complexes that we manage.
A complex should not have less than five Trustees, more than 7 Trustees does not necessarily make the work easier but does create dead wood and tends to slow down meetings and decision making.
Three of the Trustees should have specific jobs to do.
|The first is the Chairman who should have some financial and/or legal knowledge and be fully conversant with Annexure 8 of the Act.|
|The second is the Secretary who should have access to a computer, with a word processing program, and a printer.|
|The third is the Caretaker who should have a general practical knowledge of maintenance and access to sub- contractors that may be required on an urgent basis at various times.|
The remaining Trustees, be there two or more, must be prepared to stand in and assist whenever one of the above three are away or on leave. The caretaker must also be able to call on these "floating Trustees" for help at any time.
MORE INFORMATION ON DUTIES
The Chairman, Secretary and Caretaker must have a good working relationship with each other.
|The Chairman should, at all times, know what money is in the bank, what costs have to be paid during the month and budgeted for in the future and how much and where any surplus funds are invested. He should controthe finances and see that the costs of the various sections do not exceed the budget. He should also know which owners are in arrears with their levies, and initiate follow up procedures so that these offenders will bring their payments up to date.|
|The Secretary is the main record keeper. Other duties will include advising Trustees and members of meetings, recording the minutes of the meetings, paying of accounts when due .|
|The Caretaker is responsible for any labour employed by the Body Corporate, repairs and maintenance that might be required and keeping the complex neat and tidy. Generally the Caretaker would be given Petty Cash for anticipated minor expenses that will come up.|
|The Caretaker may not sign or enter into any contracts for maintenance and repair work without approval of the Board of Trustees. However he may undertake to do urgent repair work with the approval of at least one other Trustee provided the work is adequately documented and submitted to the Board at the next Trustees meeting for their approval and recording.|
The remaining Trustees should assist wherever possible and be ready to take over the duties of any of the three main Trustees at any time.
DO I GET PAID FOR BEING A TRUSTEE ?
Trustees who are owners, under normal circumstances, do not get paid for for their services. However Trustees who undertake certain duties such as being the Caretaker of the complex may be paid for their services provided this payment has been agreed to at a Special General Meeting or has been recorded in the budget as adopted at the Anual General Meeting.
Rule 10 (1)
PART 3 ANNUAL GENERAL AND SPECIAL MEETINGS
IN EVENT OF NO QUORUM
ANNUAL GENERAL MEETING and SPECIAL MEETINGS
POSTPONED GENERAL MEETING and SPECIAL MEETING
Written notice of the ANNUAL GENERAL and any SPECIAL general meeting shall be given at least 14 days prior to the meeting
The Trustees may call a Special General Meeting at less than 30 days notice for passing a unanimous or special resolution if the urgency of the matter requires a shorter period.
10 units or less minimum 50% of votes 11 to 49 units minimum 35% of votes 50 units or more minimum 20% of votes
If no quorum present after 30 minutes of the appointed time the meeting stands adjourned to the same place, same day, same time the following week.
If no quorum present after 30 minutes of the appointed time the owners present in person or by proxy and entitled to vote shall form a quorum
THE FIRST MEETING
The first meeting of owners shall be held within 60 days of the establishment of the Body Corporate. At least 7 days written notice shall be given in writing accompanied by a copy of the agenda. The quorum and procedure in the event of no quorum shall be as specified above as for ANNUAL, GENERAL AND SPECIAL MEETINGS.
The agenda for the first meeting of owners shall comprise at least the following:
|the election of Trustees,|
|the consideration, confirmation or variation of the insurances effected by the developer or the Body Corporate,|
|the consideration, confirmation or variation of an itemised estimate of the anticipated income and expenses of the body corporate for the ensuing financial year,|
|the consideration and approval, with or without amendment of the financial statements relating to the management, control and administration of the building from date of establishment of the Body Corporate to the date of notice of this meeting,|
|the taking, subject to section 47(2) of the Act, of such contracts relating to the management, control and administration of the building as may have been entered into by the developer for the continual management, control and administration of the building and common property and of which the developer shall be obliged to submit such contracts to the meeting,|
|the appointment of an auditor, or where applicable an accounting officer,|
|any restrictions or directions to be given in terms of section 39(1) of the Act (Budget and Insurances and audited statements).|
|determination of the domicilium citandi et executandi of the Body Corporate.|
THE ANNUAL GENERAL MEETING
The ANNUAL GENERAL MEETING shall be held once every year provided that not more than 15 months elapse between the date of one AGM and that of the next.
The following business shall be transacted at the ANNUAL GENERAL MEETING:
|consideration of the financial statement and report referred to in rules 37 and 38 (Financial statement and Chairman's report).|
the approval with or without amendment of:-
|the schedule of replacement values referred to in rule 29(1)(c) (Insurances),|
|the estimate of income and expenditure referred to in rule 36 (Budget),|
|the appointment of an auditor or accounting officer,|
|the determination of the number of Trustees for the ensuing year,|
|the election of Trustees for the ensuing Year,|
|any special business of which due notice has been given in terms of rule 54 (General Meetings),|
|the giving or imposing of any directions or restrictions referred to in section 39(1) of the Act (Budget and Insurances and audited statements),|
|determination of the domicilium citandi et executandi of the Body Corporate.|
All general meetings other than Annual General Meetings shall be called SPECIAL MEETINGS.
Special General Meetings may be called :
|by the Trustees whenever they think fit.|
|or upon request in writing made by 25% of the quotas of all sections,|
|or by a mortgagee or mortgagees holding mortgage bonds over not less than 25% in number of the units in the complex.|
A general meeting of the Body Corporate may be called on a shorter notice than the 14 days specified provided it is agreed by all persons entitled to attend, i.e. all owners, all holders of registered mortgage bonds over units who have advised the Body Corporate of their interest and the Managing Agent.PART 4 HELP !!! WE NEED HELP
The legislators of the Act agree that help is necessary and that in normal circumstances a Owner of a Unit in a Sectional Title Complex would not normally have the time to carry out the duties that have been specified in the Act.
Provision has been made in the Act to call for assistance.
APPOINTMENT OF MANAGING AGENTS AND EMPLOYEES
Trustees may, subject to any restrictions per Rule 26 (1), :
appoint for and on behalf of the body corporate such agent and employees as deemed fit in connection with:-
|the control, management and administration of the common property,|
|the exercise and performance of any or all the powers and duties of the body corporate.|
|delegate to one or more of the trustees such of their powers as they deem fit, and at any time revoke such delegation.|
The agent and employees referred to above are normally appointed to assist in accounting and administrative functions.
APPOINTMENT OF A MANAGING AGENT
The trustees may from time to time, and shall if required by a registered mortgagee of 50% of the units or by the members of the body corporate in a general meeting, appoint in terms of a written contract a managing agent to control, manage and administer the common property and to include the power to collect levies , appoint supervisors or caretakers.
EXTRACTS FROM THE ACT REGARDING TRUSTEES
|With effect from the date of establishment of the Body Corporate all owners are trustees and they hold office until the first General Meeting of the body corporate. At this meeting they automatically retire but are eligible for re-election|
|The chairman, also holding the position as a trustee, during the period from the establishment until the first General Meeting, shall be the developer or his nominee. At this meeting the chairman automatically retires but is eligible for re-election in terms of rule 18.|
|The number of trustees is determined by the body corporate in a General meeting, provided there are no less than two trustees.|
|There is no rule governing the maximum number of trustees. Too many trustees can be troublesome and should not be encouraged.|
WHO MAY BE TRUSTEES
The majority of trustees, must be resident owners or their spouses or a nominee of a resident owner who is a juristic person. However in the case where the majority of owners are non-resident then a declaration in the minutes of a General Meeting may recorded stating that the majority of owners are prepared to waive this clause and allow the majority of trustees to be non-resident owners. The same priciple will apply to a non-owner being appointed as trustee.
ELECTION OF TRUSTEES
Trustees are elected at the first General Meeting and hold office until the Annual General Meeting at which time they stand down but are eligible for re-election. Thereafter election of Trustees takes place at each subsequent Annual General Meeting.
NOMINATION OF TRUSTEES
Written nomination for the election of a person as a Trustee is made by an owner. This nomination must be in writing accompanied by the written consent by the person being nominated. The nomination must be given to the body corporate or the managing agent at least 48 hours before the meeting.
However should insufficient written nominations have been received prior to the meeting then owners may nominate trustees, with their consent, at the meeting.
VOTING FOR TRUSTEES
If more than the pre-determined number of trustees are nominated prior to the meeting then a ballot shall be held at the meeting to establish who of the nominated trustees shall be appointed to office.
If insufficient trustees were nominated prior to the meeting and nominations from the floor at the time of the meeting result in the nomination of more trustees than the pre-determined number then a ballot shall be held to determine who of those nominated from the floor are to be appointed to office.
WHAT IF A TRUSTEE VACATES HIS POSITION DURING THE YEAR
The trustees may fill any vacancy in their number. This is usually done by invitation. Any trustee so appointed is expected to hold office until the next annual general meeting when the trustee would stand down but be available for re-election.
WHO AND WHAT ARE ALTERNATE TRUSTEES
During the absence of a trustee or if a trustee is unable to act as a trustee then the remaining trustees may appoint another person, owner or otherwise, to the position of a trustee. An alternate trustee has the same powers and responsibilities as a trustee. An alternate trustee ceases to hold office if the trustee whom he replaces ceases to be a trustee, or if the alternates appointment is revoked by the trustees.
ARE TRUSTEES PAID FOR THE WORK THEY DO
Trustees are not paid for the duties they perform for the body corporate unless a special resolution by the owners is specifically recorded and agreed to by the owners.
Trustees may be reimbursed by the body corporate for expenses actually and reasonably incurred by them in carrying out their duties. Alternate trustees, if they are not owners, may claim any remuneration from the trustee he so replaces.
GOOD FAITH OF A TRUSTEE
Any act performed by a Trustee shall be valid even if after the act a defect is found in the appointment of the Trustee.
Every trustee, agent or other officer or servant of the body corporate is indemnified against all costs, losses, expenses and claims which he may incur in the discharge of his duties unless such costs etc. are caused by the male fide or a grossly negligent act or omission of the said person.
It is the duty of the trustees to pay such indemnity out of the funds of the Body Corporate.
DISQUALIFICATION OF A TRUSTEE
A trustee shall cease to hold office if:
|he tenders his written resignation to the Body Corporate,|
|he becomes of unsound mind,|
|he surrenders his estate as insolvent, or his estate is sequestrated,|
|he is convicted of an offence which involves dishonesty,|
|he is removed from office by resolution at a General Meeting in accordance with Rule 13 (e) Annex 8,|
|he is disqualified in terms of sect. 218 or 219 of the Companies Act from being a director of a company.|
REPLACEMENT OF A TRUSTEE
The Body Corporate may appoint another trustee to replace a disqualified trustee at a general meeting.
DOS AND DON'TS
MAKING OF LOANS
Trustees may not make loans on behalf of the body corporate to owners of units or to themselves.
SIGNING OF DOCUMENTS (INSTRUMENTS)
The trustees have the power to sign instruments which shall be binding if signed by two trustees or one trustee and the Managing Agent.
COMPLIANCE WITH THE RULES
Trustees shall at all times ensure that the occupants comply with the rules. The Managing Agent should act between the trustees and offending occupants so that any form of victimisation is reduced to a minimum.
LEVIES AND THE BUDGET
The trustees are responsible for the calculation and collection of levies for the body corporate. The Managing Agent has the experience and skills for this undertaking and should be used. The budget and the monthly levies for the ensuing year must be tabled, amended if necessary and accepted at the Annual General, Meeting.
ENFORCEMENT OF THE RULES
The trustee shall do all things reasonably necessary for the enforcement of the rules in force.
LIABILITY FOR LEGAL COSTS
An owner shall be liable for and pay all legal costs, including costs as between attorney and client, collection commission, expenses and charges incurred by the body corporate in obtaining the recovery of the arrear levies, or any other arrear amounts due and owing by such owner to the body corporate, or in enforcing compliance with these rules, the cond rules or the Act.
CHARGING INTEREST ON OUTSTANDING AMOUNTS
The trustees shall be entitled to charge interest on arrear amounts at such rate as they may from time to time determine.
IMPROVEMENTS OF A LUXURIOUS NATURE
The trustees may, if the owners by unanimous resolution so decide, effect improvements of a luxurious nature on the common property.
IMPROVEMENTS NOT OF A LUXURIOUS NATURE
Should the trustees wish to effect any improvements to the common property, other than luxurious improvements (see above) they shall first give written notice of such intention to all owners indicating:
|indicate the intention of the trustees to proceed with the improvements upon the expirery of a period of not less than 30 days reckoned from the date of posting such notice:|
|provide: details of the costs,|
|manner of financing and the effect in the levies,|
|the need, desirability and effect thereof.|
The trustees shall at the written request of any owner convene a special general meeting to discuss the proposals above and the owners may veto, amend or approve such proposals by way of special resolution.