BODY CORPORATE TRUSTEES FUNCTIONS, POWERS AND DUTIES ELECTION OF TRUSTEES

Transcription

1 BODY CORPORATE TRUSTEES FUNCTIONS, POWERS AND DUTIES ELECTION OF TRUSTEES 1. Trustees are elected annually by the Owners (collectively known as the Body Corporate) a. This occurs every year at the Annual General Meeting. Trustees therefore only stand for a year before having to be re-elected, although it is advisable to maintain some continuity by re-electing at least some of the trustees. The ideal number of trustees in LVE is between 6 and 8 b. All owners are expected volunteer to be elected as trustees for a couple of years. They can also nominate someone as a trustee. No one else may nominate trustees or vote to elect trustees c. Every registered owner has a vote as to who they would like as a trustee. They have a vote on all matters raised at the Annual General or any Special General Meeting. d. A minimum of 50% of the trustees have to be owners. So spouses/partners/tenants/family/friends or owner representatives, like accountants & attorneys or estate agents and property managers etc. can therefore also be elected as trustees (but not the managing agent or their employees!). e. Trustees do not need to be residents although it is preferable that the majority do live on the estate as this ensures that the interest of the residents is given priority and greater attention is paid to those living in the estate and the portfolios. f. In the case of any vacancies caused by resignations the remaining trustees can fill the vacancy, but cannot appoint additional trustees. They can co-opt non-voting persons to attend meetings but cannot remove any trustee without a general meeting of owners. g. Trustees cannot be remunerated or receive any benefit or favour from their role as trustee. They can of course be reimbursed for all reasonable direct costs incurred. They do their duties voluntarily for no reward, in the interest of all the owners of the estate. h. A commitment and full participation in all matters relating to the estate by every trustee is imperative for the smooth running of the estate, since trustees make decisions collectively and accept joint responsibility. i. Management Rule 13 of the ST Act disqualifies trustees who are in arrear with their levies, who are convicted of an offence, insolvent or who as disqualified in terms of the companies act 2. The Chairman is chosen by the Trustees from amongst the elected trustees a. The chairman s role is to manage all trustee and body corporate meetings in accordance with the sectional titles act and other legislation. The chairman is there to guide, assist and facilitate the conduct of business and to maintain order, regulate the orderly expression of views and guide the meeting through the agenda. A good chairman is the leader of the trustees, who co-ordinates their activities and motivates them, guides them and assists them each to achieve the desired level of expertise and success in their portfolio. b. The Chairman is not the CEO, MD or President. The chair does not call the shots and has no executive authority or any sole decision making powers and is just one of the trustees, with one vote. He however does have control over the behaviour and decision making process of the trustees and has to be a leader, motivator and organiser of the trustees. The chairman is usually the most involved, most experienced of all the trustees, the one who assists other trustees and often stands in for the trustees. In some cases (like approving certain expenses) acts as a second authority, or makes urgent decisions on behalf of the trustees, but always subject to their final approval. The Chairman must make sure that all trustee decisions taken are in the interest of the owners. Prof Graham Paddock and the Cape Town University offers a course where you will be introduced to the administrative, financial, legal and physical aspects of sectional title scheme management and the trustees role therein. A brief but highly recommended course all trustees should participate in.

2 POWERS AND LIABILITIES OF TRUSTEES 3. The trustees are authorised to act for, and on behalf of the Owners (Body Corporate) in terms of clause 39 (1) of the Act which states that: The functions and powers of the body corporate shall (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 of the body corporate holding office in terms of the rules. 4. Clause 40 states that a trustee Shall in relation to the body corporate act honestly and in good faith, and in particulari) shall exercise such powers as he may have to manage or represent the body corporate in the interest and for the benefit of the body corporate; and ii) Shall not act without or exceed the powers aforesaid, and iii) Shall avoid any material conflict between his own interests and those of the body corporate 5. It is very important to remember that all the trustees are required to ensure that the Body Corporate meets its obligations and responsibilities in terms of the Sectional Titles Act, especially as set out in Clauses 37 and 38 of the Management Rules, and all its obligations in terms of any other legislation and the municipal bylaws. The owners, by electing the trustees underwrite every legal decision made by them except when that decision is made negligently or recklessly. 6. Section 40 of the act describes the Fiduciary relationship of a trustee and should be read by everyone. Clause 3 is very important as it defines the trustees liability: A trustee of a body corporate whose mala fide or grossly negligent act or omission has breached any duty arising from his fiduciary relationship, shall be liable to the body corporate for:- i) Any loss suffered as a result thereof by the body corporate; or ii) Any economic benefit derived by the trustee by reason thereof. DUTIES OF TRUSTEES 7. The trustees functions, powers and duties are set out in the Sectional Titles Act, Management Rules clauses 26 to 49 and are further limited or defined in the Conduct Rules The act states that: The trustees are responsible for all things reasonably necessary for the control, management and administration of the common property. The specific duties include: a. Managing the repairs and maintenance of the common property b. Appointment of service providers, agents, employees, estate managers and managing agents c. Signing of documents (two signatories are required on all contractual documents) d. Enforcement of all the rules and legislation, but not making the conduct rules e. Arranging insurance cover as defined in the Act f. Levying and collection of contributions from owners, charging interest on arrear accounts and recovering unpaid debts g. Annually preparing a forecast of income & expenses and presenting this to the owners at the AGM for approval, thereby determining the levy required h. Obtaining owner approval before making any improvements to the common property, or anything not within their specific powers i. Keeping minutes of all meetings in perpetuity, and maintaining financial and tax records as required by legislation j. Keeping a register of owners and their addresses (includes electronic addresses and any change of domicilium) k. Preparing annual financial statements and ensuring that they are audited l. Preparing an annual trustees report for distribution to owners m. Investing and safeguarding reserves and surplus funds

3 n. Giving notice and organising an annual general meeting within 4 months of financial year end and distributing the required information to owners o. Calling Special General Meetings when required, or on the request of 25% of the owners All trustees must read and get to know the latest Sectional titles Act before they take on these responsibilities. Owners should read this document too, to understand what the trustee s role is. The trustees authority is limited by the Sectional Titles Act and also by any limitations placed on them by the owners annually (and minuted) at an AGM, and the requirements of the Charter they sign CONDUCT AND PROCESS The Estate is therefore run by a group of elected trustees who each have a single vote on everything that they need to decide on, on behalf of the Body Corporate. 8. Everything the trustees do must to be done democratically and no one trustee has sole decision making power unless specifically entrusted with a decision on their behalf by all the trustees. In Lonehill Village Estate a trustees authority relating to his portfolio is limited by the Charter and conduct rules 9. Trustees carry personal liability if they make a blatantly wrong decision that is not reasonably made, or procure benefits for themselves personally, or do anything that is not in the interest of the body corporate as a whole, or exceed their authority 10. The Trustees allocate roles to each trustee (Portfolios) that allows them to spread the load, but all trustees are ultimately responsible for all the decisions taken by a simple majority 11. In Lonehill Village Estate every trustee signs a Code of Conduct Charter to behave and carry out their duties in a fair and responsible manner. This includes a minimum attendance requirement, expense authority levels and managing any conflict of interest, amongst other things. 12. The total levies are determined by the owners at the AGM, and are based on the statuary requirement to recover the costs of the estate and a contingency reserve contained in the forecast submitted by the trustees and approved at the AGM 13. Trustees may raise special levies for unforeseen expenses (but not for improvements or additions, or overspent budgets) without referring to the owners for approval. 14. At the start of the financial year trustees may increase levies by any amount estimated by them. The levies are then adjusted once the final forecast of expenses and income is approved by the owners at the AGM a few months later in that year 15. Trustees must enforce, and adhere to the conduct rules, but they do not make them and cannot exempt any owners (including themselves) from complying with the rules. Only owners with a 75% approval vote at a Special General Meeting can change the rules (and in some instances a unanimous vote is required) It is unfortunate that so many trustees or owners refer to the Board of Trustees as it creates the false impression that trustees are directors of the body corporate and that they possess corporate power. The trustees are the servants, not the masters of the body corporate, and both parties are guided by the legislation in performing their functions in the interests of the owners. The owners delegate authority to the Trustees to carry out the owner s obligations on their behalf. It must be emphasized that although the body corporate (All the Owners) controls the estate, it cannot ignore its responsibilities under the Act and rules. For example, section 37 of the Act requires the body corporate to raise sufficient money to pay all its bills and to adequately maintain the common property. In approving the annual forecast, the owners (members of the body corporate) must make provisions to cover all anticipated expenses for the next year. They may not deliberately under-cut the forecast or refuse to make the necessary provisions for future repairs. A second example is that neither owners nor the trustees can ignore or make exceptions to the requirements of the agreed conduct rules.

4 OWNERS RESPONSIBILITY TO BECOME A TRUSTEE There are so many cases of poorly run complexes with sky high levies and a loss of investment values due to poor owner participation and inexperienced or selfish, egocentric trustees being appointed. You as an owner have liabilities if it goes wrong so you are responsible to ensure that the best candidates are selected for the role Being a trustee means giving up a bit of your personal time to help run the estate, but then living in a sectional title complex also frees you from a lot of day-to-day activities you would normally be involved in if you owned a free standing home! Agree? You no longer have to do pool cleaning, cutting grass, sweeping leaves and driveways, arranging your house insurance and checking security. You do not do regular painting and repairs & maintenance of the exterior of your property or have to check, query or dispute and pay all those expense accounts every month. The Body Corporate does this for you. So you do have some spare time!!! You should then use this time to ensure that your investment is well looked after by becoming a trustee for a few years. You are, after all, a shareholder (you own a section) of the Body Corporate whose financial affairs and good governance is very important to you. THE TIME COMMITMENT The trustees generally meet once a month to discuss and make decisions relating to the issues that need their direction or input. These meetings are held at a time convenient to the trustees (In LVE it has been customary to hold these from around 6pm on the third Tuesday of the month), and they last approximately 2 hours, depending on the agenda (and if the trustees do not waffle). Each trustee has an opportunity to add value to all the portfolios and have input and vote on all decisions to be made. The day to day issues are handled by the estate managers, and the managing agents handle the financial administration. Both will alert the trustees if there is anything that needs their attention and report back at the monthly meeting. You keep in contact with them on matters pertaining to your portfolio and they do much of the running around, organizing meetings, supervising, checking, ing and letter writing for each trustee. If allocated a portfolio you would need to meet with certain service providers and the estate managers regularly. PORTFOLIOS Each trustee in LVE is allocated one or more portfolio as agreed between the trustees at their first meeting, based firstly on the estate s needs and then taking into account your skills. You are then responsible to monitor that activity, in conjunction with the estate managers or managing agents to ensure that the standards are maintained. This should only take between 3 to 6 hours a month, depending on your level of involvement and the portfolio. It includes your meeting with a service provider every month and feeding back information to the other trustees for comment and approval. While a portfolio is allocated to you, it is only a supervisory, advisory and guidance function with all decisions essentially still the responsibility of all the trustees. You handle emergencies when they arise and motivate expenses, improvements or changes by getting trustee or body corporate approval. You also respond to any owner queries or concerns relating to your portfolio not handled by the estate managers. The Portfolios generally are: 1. SECURITY: One of the very important portfolios. You make sure everyone is satisfied that the estate is very secure and that the guards understand and perform their security duties correctly. You need to

5 interact with the supervisor, the guards and the security company management ensuring that the guarding activities are carried out diligently and consistently. Awareness is a main requirement You inspect the guardhouses and equipment regularly for functionality, appearance and cleanliness. You ensure that the estate managers and Security Company are monitoring the guard reports, the performance of the access systems and perimeter security installations and are very promptly attending to repairs and all reported incidents. You personally address any resident issues not handled by the estate office and review all security incidents, reporting back to the trustees and make sure that the residents are secure in the estate 2. GARDENS: The glamorous and very important, very busy portfolio. You interact with the management of the garden service company, giving direction to them relating to the common property gardens, including exclusive use gardens. You obtain trustee approval for all planned major plantings, tree removals or other material changes. The service provider identifies suitable suppliers and you authorise all major purchases like compost, lawn dressing, seedlings, shrubs, trees, insecticide etc. and audit their pricing and quality. Each month you survey of a part of the estate and identify areas where improvements are required and communicate this to the service provider. Because of the size and nature of the estate this portfolio requires a fair amount of attention. You personally address any resident issues and complaints not managed by the estate office. You report back to the trustees monthly, making sure expenses are within the approved annual estimates 3. MAINTENANCE: A busy portfolio that covers a wide range of activities and requires the highest level of related knowledge. There are several specific service providers that you deal with indirectly (via the estate managers) including the property maintenance company providing the team of workers. The estate managers handle the day to day issues so your time is spent in planning, structuring the process of promptly dealing with requirements, monitoring problems solved. You prepare and sign off on the annual projects approved at the AGM and all major maintenance requirements. You give monthly feedback to the trustees, obtaining approval for all major expenses. The portfolio includes all common property items like building repairs and maintenance, pool and fountain upkeep, driveway maintenance, wall repairs and painting, all woodwork maintenance and repairs, complex painting and varnishing, all street lights and electrical and plumbing installations, water supply and fire safety. You inspect the estate regularly to satisfy yourself that the estate managers and maintenance team are maintaining the required standard and doing their site inspections on a regular basis. You would motivate all major repairs, maintenance or upgrade projects at the AGM. You report back to the trustees monthly, making sure expenses are within the approved annual estimates 4. FINANCE: This requires some basic accounting knowledge and covers reviewing the accuracy of the monthly financial statements received from the managing agents and checking the accuracy of the allocation of income & expenses handled by the Estate Managers. You do comparisons with the owner approved annual estimates and present this to the trustees monthly, or discuss with them individually. Together with the Managing Agent you monitor the security of our funds and adherence to all payment authorization requirements and ensure that appropriate financial controls are in place.

6 You draw up the annual income and expense forecasts with input from the trustees and managing agents, for approval at the AGM. This determines the levies. You verify all Utility billings, taxation payments etc. and recoveries from owners 5. DEBT COLLECTIONS: This portfolio can be undertaken by the finance trustee as it is not very time consuming and is also handled by the managing agents. Working with the managing agents you monitor the account arrear situation monthly, ensure that they are issuing appropriate follow-up reminders and making calls. You approve instructions to proceed with legal recovery where necessary and monitor the progress of the legal recovery. You report back to the trustees every month. 6. COMMUNICATIONS: It is a very important portfolio as good communications and openness with owners and residents contributes to a successful estate. You are responsible, with the estate managers, to create news communications as required including: The Village Times a regular (monthly if possible) residents newsletters including any relevant input from owners, residents, trustees and the estate managers. These are dropped at each unit and also ed to Owners. Copies are kept on both websites. Owners newsletters are required five times a year, and are prepared in conjunction with the Finance trustee and Estate Manager: These are sent by to Owners only and kept on the Angor website. o November - Report back immediately after the AGM on decisions and Budget figures o March - Midyear financial update and reminders regarding certain requirements taken from Conduct Rules o April - insurance renewal feedback on Excesses, claims, and cover o September - yearend feedback with financial results o AGM news encouraging attendance and motivation for Trustees, and comments on Budget proposals You monitor the Web site, ensuring that news, photos and documents etc. are added when needed, keeping the web site content current and meaningful and recommending improvements. You review all comments, photos and documents added by residents on the web site for acceptability. You occasionally liaise with the web developer/hosting manager. You edit all the documents we create for resident use, with the help of the estate managers who create them, the managing agents and legal any consultants. You review the new resident information packs for quality and acceptability. You review the use of SMS text messages used by the estate, any pamphlet drops and the appearance of the noticeboards at the main entrances and clubhouses. You report back to the trustees monthly, making sure expenses are within the approved annual estimates. 7. FACILITIES (CLUBHOUSES): The facilities are an important part of the image of the estate. You are responsible for liaising with our facility service providers making sure that we met our obligations to them, and that they perform within their contract. You manage their contract reviews. You monitor the state of the three clubhouses and the surrounding pool areas and motivate repairs or replacement of furniture and equipment with the trustees and consider any improvements required. You identify ways to promote maximum use of all the facilities by residents to ensure viability of the service providers for the owners benefit, including the marketing of the services, organizing a few body corporate events and managing any special subsidies or assistance offered. You monitor and

7 encourage the use of the notice boards at the main gates, the SMS text services and pamphlet drops offered to the service providers. You report back to the trustees monthly, making sure expenses are within the approved annual estimates. 8. UTILITIES: This impacts on the appearance of the estate and has major cost implications a. REFUSE & RECYCLING: You monitor and motivate recycling by residents and manage the relationship between the estate office and Pick-it-up and the council, and any recycling company employed. You monitor the cleanliness and appearance of the refuse areas and removals of refuse and recycling. You examine the costs and efficiency of this service and recommend improvements. You check on signage and manage the web information on recycling b. WATER: You monitor the Council accounts and check that readings are taken. You identify and investigate any possible water leakages or abuse and visible wastage. Failure to do this could result in substantial hidden losses. You report back to the trustees on any areas of possible savings in water usage and investigate alternative sources of water for emergencies. c. ELECTRICITY: You monitor the Eskom electricity account and the recovery billings to owners. You propose changes in the rate charged to residents when the Eskom changes their rate, and track faulty unit electricity meters that need to be replaced, confirming the billing for any periods where there was no charge. You look at ways to reduce electricity consumption in the estate, especially during peak times to reduce the average rate paid. d. TELEPHONY and DATA: You work with the estate office to ensure that owners have good phone signals and connectivity. You investigate and motivate any improvements that may be available to the estate s technology, including cell phones, landlines, TV reception, internet connections, Fiber optic and Wi-Fi etc. e. LAUNDRY: You work with the estate office to ensure that the machines are always operating and that the laundry is neat and clean, motivate price changes or machine replacements You report back to the trustees monthly, making sure expenses are within the approved annual estimates and highlight any changes or requirements. 9. CHAIRMAN: The chairman s sole role is to ensure that the trustees and body corporate adhere to the legal requirement of all bylaws and legislation, to arrange and run all meetings in a democratic way and facilitate the efficient working of the group of trustees, leading, coaching and guiding if required. The owners often wrongly perceive the role as the leader/face of the body corporate so it does require some interaction with owners and residents, estate agents and the service providers, acting on behalf of the trustees collectively. However Chairman is not the CEO, MD or President and cannot make decisions on their own other than where there is an emergency, and then only in line with the perceived wishes of the other trustees. It is probably the most onerous of the portfolios time wise and requires regular interaction with the trustees in relation to their portfolios, the estate managers on day to day issues and the managing agents regarding meetings and legal requirements. The Chairman may take on one or more of the minor portfolios. The Chairman manages the estate management and managing agent s contract performance and acts as a substitute when a trustee is unavailable. A good knowledge of the Sectional Titles Act and how to conduct democratic meetings is of vital importance. Leadership skills and a diplomatic, not autocratic manner are required. ESTATE MANGERS Most complexes appoint a skilled Estate Manager (separate from a Managing Agent). This is done by the Trustees who can determine which of their authorities and responsibilities they wish to delegate to the estate managers. The estate mangers report to all the trustees. There is no reference to an estate manager in the

8 Sectional Titles Act so any appointment would be done on the basis of a contract, which as a courtesy to the next trustees should never be for more than a year at a time and with a maximum notice period of 3 months. The estate manager is responsible for the maintenance of the common property and normally manages and recommends all service providers, but does not appoint them. The estate managers may also perform certain administrative functions, like issuing security devices, managing security systems, issuing permits and ID cards, managing supplier payments, interacting with the owners and residents on Conduct rule issues and concerns and all maintenance requirements. They manage all administrative issues including hardcopies and electronic records, ensuring adequate backups and filing is done. They monitor the websites The estate manager has no authority unless it is specifically delegated to them by the trustees. They should however be able, due to their experience and roles, to act as advisors to the trustees on all matters pertaining to the running of the estate, guiding them where necessary. They should provide continuity of decisions and rules for new trustees The MANAGING AGENTS Most complexes appoint professional managing agents to manage the financial and legal administration of the estate, including levy collections, keeping of accounting records and advising the trustees on matters of compliance with the Sectional titles Act. The appointment of managing agents is covered by the Sectional Titles Act and subject to certain limitations and approval by the owners. Bggl/Lve 2015 (1)