Sectional title schemes have trustees that are elected to further the interests of the scheme. The owners empower the trustees to act in the best interest of the scheme. This generally includes managing finances, maintenance and day to day operations. Trustees represent the owners and must do as directed/restricted by them.
What is a trustee and how are they elected?
A trustee is a person or firm that holds and administers property or assets for the benefit of a third party
– Investopia
The sectional title schemes act states that a scheme is required to have trustees. In case of a new scheme, a meeting needs to be held to appoint the trustees. If the scheme already has trustees, then new trustees are elected at the annual general meeting (AGM) – as set out in Prescribed Management Rule 13. In most sectional title schemes, an ongoing directive was issued at a previous AGM that determined that all nominations need to be in 48 hours before an AGM.
During the AGM, owners will vote for the trustees.
The people with the most votes will become trustees.
Simple!
Who qualifies to be a trustee?
Currently, the law does not restrict non-owners, owners, friends/family or people that are in arrears with their levies from becoming trustees. In short, anyone who is nominated and voted in can become a trustee.
In some cases, the body corporate (owners) can put ongoing directives in place that the trustees need to be, for example:
- Living in the property
- Be an owner
- Be up to date with levies.
Note that the directives aren’t law, but can be chosen by the owners as an enforced guideline.
Who cannot be a trustee?
The law also states that the following person(s) may not be a trustee:
- A person who is unsound of mind
- If a person is disqualified from being appointed or acting as a director of a company (in terms of section 218 or 219 of the Companies Act)
- An Owner is not entitled to be nominated as a Trustee where a judgement or order for the payment of arrears has been granted against that Owner AND that owner fails or refuses to make payment of their arrears
What tasks does a trustee do?
Trustees are elected based on trust and from this position, they manage the affairs of the body corporate. If a scheme is self-managed, the trustees will need to do a lot of the work themselves. On the other hand, if the block has a managing agent, they need to lead by instructing them what to do.
In both cases, the trustees will need to deflect their authority to the needed parties to make sure the scheme runs smoothly, the finances are kept healthy and maintenance are done as requested.
Portfolios and trustees
Once elected, trustees will vote for a chair and vice-chairperson. In my experience, the chair often needs to handle conflict and relationships between finances, trustees, managing agents and owners when the normal channels fail. Once these roles are elected, the trustees are (generally) given a portfolio that they will need to manage and maintain. This might mean putting up signs, checking if the work was done or giving orders to make sure the work is done.
Though there are no absolute portfolios, I like the following three.
Financial management portfolio
Trustees are ultimately responsible for financial management. This includes issuing levy statements, litigation against non-paying owners, making sure that payments happen above board and salaries are paid to the caretaker and other staff. In many cases, this will include creating/getting reports, liaising with the auditors and understanding the levy structures and budget.
Maintenance management portfolio
Legally, each sectional title block must have a reserve fund and a 10 year maintenance plan. If the maintenance is due in the current year, the trustee in control of this portfolio should make sure that the required work gets done. If the maintenance plan was questioned at the AGM, it is normally asked that this trustee, with the help of professionals, should investigate and report on the matter to the owners.
There is also day to day maintenance that needs to happen. This includes gardening and cleaning services, blocked drains, replacing lightbulbs and rubbish removal. All schemes I have seen has a caretaker. The caretaker is hired by the body corporate to take care of the property. This includes a lot of the above or getting in a specialist if required.
Communication portfolio
Keeping the communication open between the managing agent, owners and trustees can be tricky. For this reason, I personally have a trustee on the board that handles this. I communicate with her, and she liaises between me and the owners. For example, if we need to communicate about load shedding, decisions that affect owners directly or in case we have owners not able to read their levy statements.
The communication department is the glue that holds everything together. They work with maintenance, finances and the chairman to make sure everyone is on the same page. Here are some examples:
- The trustee will ask the managing agent to communicate to owners about load shedding so that they don’t get stuck in the lift.
- The trustee will communicate to trustees about issues with owners
- She/he will be required to check all communications, trustee meeting notes etc. for spelling, grammar and if the decisions were noted correctly before it is sent to all trustees/owners.
- Communications will be sent to owners when the house rules are not obeyed.
Managing agents and trustees
In most schemes, the day to day operations is managed by a managing agent. Trustees give the agent instructions to do certain things in their portfolios such as manage the caretaker, finances (sending of levy statements, legal matters, paying invoices), handling owner queries and getting quotes. In cases where the trustees are exceptionally busy, this can be very helpful.
How do you get rid of a trustee in sectional title schemes?
Once elected, it can be challenging to get rid of a trustee. In some extreme cases, the trustees can call for a special general meeting with the intention of the owners to vote to get rid of the trustee. In other scenarios, the trustee can do certain things that disqualify them while being a trustee or can decide to resign. Here are some legal reasons for a trustee to leave:
- If the trustee is convicted of an offence that involved dishonesty
- The trustee can resign
- If she/he becomes of unsound mind
- If the trustee becomes insolvent or is sequestrated
Conclusion
A trustee is elected at an annual general meeting (AGM) by the owners of a sectional title scheme to represent the owners. Certain restrictions and directions can be placed on them to perform their tasks.
Trustees are not paid (unless the owners vote by special resolution to do so). Therefore, it is important that trustees are voted in based on trust.
As a trustee, a portfolio could be assigned to you, and you will need to report back to the owners and trustees on matters in this portfolio. If the scheme employed a managing agent, then the trustees can instruct the agent to do much of the work.
Happy investing!
Extra reading:
- De Lucia Group – Breaking Down Trustee Governance – A Guide To Duties Of Trustees
- Hanco Management & Services – Trustees in arrears
