In a sectional title scheme, trustees play a crucial role in ensuring that the complex is well-managed, financially stable, and compliant with relevant laws. Their responsibilities are primarily governed by the Sectional Titles Schemes Management Act (STSMA) and the Community Schemes Ombud Service (CSOS) Act. This blog explores the roles and duties of trustees, highlighting their legal obligations, best practices for effective governance, and what owners can do if trustees fail to act in their best interests.

Who Are the Trustees?

Trustees are individuals elected by the members (owners) of a sectional title scheme to manage and oversee the affairs of the Body Corporate. The number of trustees and their term of office are determined by the scheme’s rules, but they must always act in the best interests of all owners.

Key Roles and Responsibilities of Trustees

1. Financial Management

Trustees are responsible for the financial well-being of the scheme. This includes:

• Preparing and managing the annual budget to ensure that all necessary expenses are accounted for.
• Ensuring owners pay their levies on time, as levies fund the scheme’s operations.
• Overseeing the Administrative and Reserve Funds as required by the STSMA Regulation 24.
• Approving and managing expenditure for maintenance and operational costs, ensuring no unauthorized or reckless spending occurs.
• Ensuring the Body Corporate remains solvent and does not accumulate unnecessary debt.

Example:

A sectional title complex in Pretoria faced a fiscal crisis when trustees failed to increase levies in line with rising maintenance costs. As a result, the Body Corporate ran out of funds to pay for security services, leading to increased crime in the complex. Proper financial planning and transparent communication with owners could have prevented this situation.

2. Maintenance and Repairs

Under STSMA Regulation 22, trustees must create and implement a 10-Year Maintenance, Repair, and Replacement Plan. This ensures that:

• Common property is regularly maintained and repaired to prevent deterioration.
• Structural integrity of buildings is preserved, which in turn maintains property values.
• The Reserve Fund is sufficiently funded for long-term maintenance, reducing the need for sudden special levies.

Example:

A townhouse complex in Durban allocated funds for roof replacements over a 10-year period, ensuring gradual contributions from owners instead of an unexpectedly large expense. In contrast, another complex neglected its maintenance planning and had to impose a sudden special levy of R30,000 per unit when the roof collapsed due to water damage.

3. Compliance with the STSMA and CSOS Act

Trustees must ensure that the Body Corporate operates in line with:

• The STSMA, which governs sectional title schemes and outlines specific trustee duties, including financial accountability and maintenance planning.
• The CSOS Act, which provides dispute resolution services and requires schemes to file annual returns and budgets.
• Any additional conduct and management rules registered with the Community Schemes Ombud Service (CSOS).

Failure to comply with these regulations can result in penalties or legal action against the Body Corporate.

4. Governance and Decision-Making

Trustees must act collectively and transparently in decision-making. Their governance duties include:

• Holding trustee meetings and keeping proper records of decisions made.
• Calling and chairing Annual General Meetings (AGMs) and Special General Meetings (SGMs) when necessary.
• Ensuring fair and legal enforcement of scheme rules and regulations.
• Consulting owners on major decisions, particularly those involving financial commitments or rule changes.

Example:

A sectional title scheme in Johannesburg faced legal action when trustees unilaterally decided to impose a new parking allocation system without consulting owners. This led to multiple disputes, which could have been avoided with proper communication and consultation.

5. Managing Disputes and Owner Relations

Trustees serve as the first line of dispute resolution within the scheme. They must:

• Address owner complaints fairly and in line with CSOS guidelines.
• Mediate conflicts between residents to ensure a harmonious living environment.
• Escalate unresolved disputes to CSOS when necessary.

Example:

A Cape Town complex had ongoing noise complaints about a short-term rental unit. Trustees failed to act, leading frustrated owners to escalate the matter to CSOS. The tribunal ruled in favor of stricter rules on short-term rentals, forcing trustees to act.

6. Insurance and Risk Management

Trustees are responsible for ensuring that the scheme has adequate insurance coverage, as required by the STSMA. This includes:

• Insuring common property against risks such as fire, storm damage, and liability claims.
• Keeping an updated asset register for insurance purposes.
• Reviewing insurance policies periodically to ensure they remain adequate and up to date.

Example:

A townhouse complex in Port Elizabeth suffered severe storm damage, but because the trustees had failed to update their insurance policy, the payout was insufficient to cover repairs. This led to additional costs for owners, which could have been avoided with better planning.

What Can Owners Do If Trustees Breach Their Fiduciary Duty?

Trustees have a fiduciary duty to act in the best interests of the Body Corporate. If they fail in their duties, owners have several recourse options:

1. Request Financial and Operational Transparency: Owners can request financial statements and trustee meeting minutes to ensure transparency in management.
2. Call for a Special General Meeting (SGM): Owners can convene an SGM to discuss concerns, propose corrective measures, or even vote for trustee removal.
3. Report to CSOS: The Community Schemes Ombud Service provides a legal avenue for owners to lodge complaints about financial mismanagement, failure to maintain property, or unfair rule enforcement.
4. Take Legal Action: If trustees engage in gross mismanagement or fraudulent activities, owners can take legal action to hold them personally liable for losses.
5. Vote for New Trustees: At the next AGM, owners can vote out trustees who have failed in their responsibilities and elect individuals who will act in the best interests of the scheme.

Example:

In a Gauteng complex, trustees misappropriated funds meant for maintenance. Owners took the matter to CSOS, which ruled in their favor, forcing the trustees to reimburse the Body Corporate and resign from their positions.

Conclusion

Trustees play a vital role in the effective management of sectional title schemes. Their responsibilities range from financial oversight and maintenance planning to governance and compliance with the STSMA and CSOS Act. Owners should ensure that trustees are competent, committed, and act in the best interests of the scheme to maintain a well-run and financially sound complex.

By understanding their legal responsibilities and executing their duties effectively, trustees can contribute to a harmonious and well-maintained sectional title community. Likewise, owners must remain informed and proactive to hold trustees accountable when necessary.

If you require more information, get in contact with us at portfolio1@quartoma.co.za

Kind Regards

Danie Brink Director of Operations