Duties of a trustee in a body corporate: the law, the meetings and the record

01

What a trustee is, and where the duties come from

A body corporate is made up of every owner in a sectional title scheme, and it acts through its trustees. Section 7(1) of the Sectional Titles Schemes Management Act 8 of 2011 (the STSMA) says its functions and powers "must, subject to the provisions of this Act, the rules and any restriction imposed or direction given at a general meeting of the owners of sections, be performed and exercised by the trustees".

So the trustees carry out everything section 3(1) gives the body corporate to do: running the administrative and reserve funds, levying contributions, insuring the buildings, maintaining the common property "in a state of good and serviceable repair" and, in general, controlling, managing and administering the common property for the benefit of all owners. They do it under the scheme's rules, and the owners in general meeting can restrict or direct them.

Section 8 sets the standard of behaviour. Each trustee "must stand in a fiduciary relationship to the body corporate", which means a trustee must:

• act honestly and in good faith, in the interest and for the benefit of the body corporate, and not act without or beyond their powers;
• avoid any material conflict of interest, and not receive any personal economic benefit, direct or indirect, from the body corporate or any other person;
• tell every other trustee about any direct or indirect material interest in a contract of the body corporate as soon as they become aware of it.

A trustee who breaches that relationship is liable to the body corporate for any loss it suffers as a result, or for any economic benefit the trustee received (section 8(3)).

The detail sits in the management rules. Most schemes use the Prescribed Management Rules (PMR), Annexure 1 of the Sectional Titles Schemes Management Regulations (Government Notice R. 1231 of 7 October 2016). A scheme may amend its rules under section 10 of the Act, so check your own registered rules before relying on a rule number quoted here.

02

Who can be a trustee, and how trustees come and go

• Number. Where fewer than four members own primary sections, each is a trustee without election; where there are more than four, the members decide how many to elect (PMR 5(2) and (3)).
• Who can stand. A trustee need not be an owner (PMR 6(1)), but the managing agent, the managing agent's employee or an employee of the body corporate may not be a trustee unless they are a member (PMR 6(2)).
• Nomination and term. Any member may nominate anyone, in writing with the nominee's consent, delivered at least 48 hours before the annual general meeting (PMR 7(1) and (2)). Trustees are elected at each AGM and serve until the end of the next one (PMR 7(4) and (6)); a vacancy may be filled by the remaining trustees or by a general meeting (PMR 7(5)).
• Chairperson. At their first meeting after the AGM the trustees elect a chairperson from among themselves (PMR 12(3)).

Under PMR 6(4) a trustee ceases to hold office on, among other things, resigning in writing, sequestration, a conviction for an offence involving dishonesty, disqualification as a company director, removal by ordinary resolution of a general meeting whose notice specified the vote, or failing to pay an amount a court or adjudicator has ordered them to pay the body corporate.

Owner trustees are unpaid unless the members decide otherwise by special resolution; a trustee who is not an owner may be paid only as approved in the administrative fund budget (PMR 8(2) and (3)). The body corporate reimburses reasonable expenses (PMR 8(1)), indemnifies a trustee who is not a managing agent for any official act that is not in breach of their fiduciary obligations (PMR 8(4)), and must insure against loss of funds through fraud or dishonesty by a trustee, managing agent, employee or other agent (PMR 23(7)).

03

The duties of a trustee in practice

PMR 9 lists the general duties. The trustees must:

1. meet to carry out the body corporate's business;
2. exercise its powers and functions in accordance with resolutions of general meetings and trustee meetings;
3. apply its funds in accordance with budgets approved by members in general meeting;
4. appoint any agent or employee "in terms of a duly signed written contract";
5. compile minutes of each trustee and general meeting and send them to everyone entitled to notice of that meeting within 7 days.

Around those sit the body corporate's duties, which the trustees carry out:

• Money. Proper books, with separate books and bank accounts for the administrative and reserve funds; budgets, annual financial statements and the 10-year maintenance plan for the AGM (PMR 26(1)); levy notices to each owner within 14 days of the budgets being approved (PMR 25(1)); financial records kept for six years (PMR 26(3)).
• Levies between AGMs. By written trustee resolution, a special levy for a necessary expense that cannot wait for the next budget, or an increase of up to 10 per cent at the end of a financial year (PMR 21(3)(a) and (b)).
• Insurance. A replacement valuation of the buildings at least every three years, and public liability cover for an amount set in general meeting but not less than R10 million (PMR 23(3) and (6)).
• Reporting. A trustees' report on the year (PMR 26(1)(f)), a report to each AGM on the trustees' activities and decisions (PMR 17(6)(j)(i)), and a report on how far the maintenance plan has been implemented (PMR 22(4)).
• Records. Minutes, lists of trustees, members and tenants, and a consolidated set of rules, open to an owner or bondholder within 10 days of a written request, or five days for the rules (PMR 27).

Trustees can delegate powers and duties to a trustee, a member, an agent or an employee, but must specify in writing the power, a spending limit and any conditions (PMR 21(3)(g)). A managing agent can provide specified services under the trustees' supervision (PMR 28(5)); see managing agent duties. Delegation moves the work, not the accountability to the owners.

04

Trustee meetings, conflicts of interest and decisions

• Notice. Any trustee may call a meeting on at least seven days' written notice with an agenda, or shorter reasonable notice when urgent (PMR 11(1)). Meetings may be held by telephone or video if everyone entitled can take part (PMR 11(5)).
• Observers. Members, registered bondholders and the managing agent may attend and speak but not vote, and can be excluded when contraventions or private matters are discussed (PMR 11(3)).
• Quorum. Half the trustees by number, and never fewer than two (PMR 13(1)).
• Voting. A majority of trustees present and voting, with the chairperson's casting vote unless there are only two trustees; a resolution can also be passed by a notice sent to every trustee with its text, when a majority sign their agreement before the closing date (PMR 14).
• Signing. A document binds the body corporate only if signed on the authority of a trustee resolution, by two trustees or one trustee and the managing agent (PMR 10(1)(b)).

Conflicts of interest are covered three times. The Act requires disclosure of any material interest in a body corporate contract (section 8(2)(b)(ii)). PMR 6(3) says a trustee with a direct or indirect personal interest in a matter "must not be present at or play any part in the consideration or decision" of it. PMR 14(3) disqualifies them from voting on it. A trustee whose relative runs the garden service, or who owns the unit with the leaking roof, leaves the room for that item, and the minutes say so.

PMR 27(2)(a) requires minutes to record the date, time and place, who was present and in what role, the text of every resolution and the result of every vote. A resolution to appoint a contractor or spend reserve money reads best with the reason and the amount beside it.

05

The trustees' part in looking after the common property

Maintenance is where most owners judge their trustees. The body corporate maintenance guide covers who maintains what, the 10-year plan and the reserve fund. For trustees, the working duties are:

• Spend within the plan and budget. Money leaves the administrative fund by trustee resolution in line with the approved budget, and the reserve fund in line with the approved maintenance plan (PMR 24(4) and (5)(a)).
• Act on urgent repairs, and report them. Trustees may resolve to pay from the reserve fund where immediate spending is needed to ensure safety or prevent significant loss or damage, or where the need could not reasonably have been foreseen, but must report it to members as soon as possible (PMR 24(5)(b)).
• Follow up owners' defaults. Where an owner fails, despite written demand, to repair their section and it threatens the common property or the safety of the building, the body corporate must remedy it and recover the cost (PMR 31(2)).

A body corporate that pays a caretaker, gardener or cleaner is an employer under the Occupational Health and Safety Act 85 of 1993. Section 8(1) requires it to provide and maintain, as far as is reasonably practicable, a working environment that is safe and without risk to its employees' health, and section 9(1) to ensure that others directly affected, such as residents and visitors, are not exposed to hazards. Under section 37(2) it can be presumed to have done what its contractor did or failed to do, unless they agreed the arrangements in writing: the 37.2 agreement.

An executive managing agent, who takes over the trustees' functions, must arrange an inspection of the common property at least every six months and report to members at least every four months, including proposed repairs for the next four months (PMR 28(3) and (4)). Trustees who keep the job are not bound to that timetable, but owners will expect something like it.

Owners who believe their trustees are failing can apply to the Community Schemes Ombud Service (CSOS). Under section 39 of the Community Schemes Ombud Service Act 9 of 2011 an adjudicator may, among other orders, require a general meeting to be called, declare a resolution void or invalid, order the accounts audited, or require repairs and maintenance to be carried out.

06

Where the record fails, and what SiteClara does about it

In most schemes trustees are volunteers, and the part of the job owners see least is the part that goes wrong. The minutes say the gate motor was to be serviced; nobody can say whether the caretaker checked it each week afterwards. The AGM report says the common property is well maintained; the evidence is a residents' chat group, an undated contractor's invoice and the chairperson's memory. When an owner asks how long the stairwell lights were out, or an adjudicator asks what was done about a leak, the trustees are left reconstructing it.

SiteClara records that routine part. A printed QR poster, with an optional NFC tag behind it, goes up where something is checked or reported: the gatehouse, the pool pump room, the bin area, the generator enclosure, each stairwell. The caretaker, gardener or a contractor's staff scan or tap with their own phone, with no app to install, see the checks due there and mark each one done or say what stopped them. The time and the named person are recorded as it happens, with a photo when one is asked for. A fault reported at the tag stays on a list of open jobs until someone closes it.

A supervisor, such as the caretaker's manager or the managing agent, sees what was due, done and missed, gives the reason when a check was missed, and approves a short daily report that goes to the nominated contacts, such as a trustee, the next morning. The trustees then have a dated, named record to draw on for the AGM.

07

Questions people ask

What are the five main duties of a trustee?

PMR 9 of the Prescribed Management Rules (Government Notice R. 1231 of 2016) lists five general duties: to meet to carry out the body corporate's business; to exercise its powers and functions in accordance with resolutions of general meetings and trustee meetings; to apply its funds in accordance with budgets approved by members; to appoint any agent or employee in terms of a duly signed written contract; and to send minutes of each meeting within 7 days to everyone entitled to notice of it.

What can a trustee not do?

Section 8(2) of the Sectional Titles Schemes Management Act 8 of 2011 says a trustee must not act without or exceed their powers, must not receive any personal economic benefit, direct or indirect, from the body corporate or any other person, and must disclose any material interest in a body corporate contract. Under PMR 6(3) of the Prescribed Management Rules (Government Notice R. 1231 of 2016) a trustee with a personal interest in a matter must not be present at or play any part in its consideration or decision, and under PMR 21(2) the body corporate may not make loans from its funds without a unanimous resolution.

How much power do trustees have?

Under section 7(1) of the Sectional Titles Schemes Management Act 8 of 2011 the trustees perform the functions and exercise the powers of the body corporate, subject to the provisions of the Act, the rules and any restriction imposed or direction given at a general meeting of owners. PMR 9 of the Prescribed Management Rules (Government Notice R. 1231 of 2016) adds that they must act in accordance with meeting resolutions and spend only in accordance with budgets approved by members, so the owners in general meeting set the extent of their authority.

Can a trustee be removed without their knowledge?

A trustee can be removed by ordinary resolution of a general meeting only if the intention to vote on the removal was specified in the notice convening the meeting (PMR 6(4)(g) of the Prescribed Management Rules (Government Notice R. 1231 of 2016)), and PMR 15(1) requires at least 14 days' written notice of a general meeting to all members. A trustee who is an owner therefore receives that notice; the rules do not require separate notice to a trustee who is not a member.

Are trustees personally liable?

For a breach of their fiduciary duty, yes: section 8(3) of the Sectional Titles Schemes Management Act 8 of 2011 makes a trustee liable to the body corporate for any loss it suffers as a result, or any economic benefit the trustee received. For official acts that are not in breach of those duties, PMR 8(4) of the Prescribed Management Rules (Government Notice R. 1231 of 2016) requires the body corporate to indemnify a trustee who is not a managing agent.

Can a managing agent be a trustee of the body corporate?

Not unless they own a unit in the scheme. PMR 6(2) of the Prescribed Management Rules (Government Notice R. 1231 of 2016) says the managing agent, an employee of the managing agent or an employee of the body corporate may not be a trustee unless that person is a member of the body corporate.

08

Where to read the official guidance, and a list to take away

• The Sectional Titles Schemes Management Act 8 of 2011: sections 3, 7 and 8.
• The Sectional Titles Schemes Management Regulations (Government Notice R. 1231 of 7 October 2016), Annexure 1: PMR 5 to 14 on trustees and their meetings, 17 on general meetings, 21 to 27 on money and records, and 28 on managing agents.
• The Community Schemes Ombud Service's legislation page, with the Act, the regulations and the CSOS Act.
• Your scheme's own registered rules, which may differ from the prescribed ones.

A short list to take away:

1. Read section 8 of the Act and PMR 6(3) and 14(3), and declare any interest in writing.
2. Minute every resolution with its text, the vote, and the reason and amount where money is spent, and send the minutes within 7 days.
3. Put every contractor, agent and employee on a signed written contract, with a 37.2 agreement for contractors.
4. Delegate in writing, with a spending limit.
5. Report urgent reserve fund spending to members as soon as it is made.
6. Keep a dated, named record of routine checks and faults on the common property, so the AGM report rests on facts.