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Effect on trustees

24 November 2016

I am a trustee of a body corporate, how do the  Community Schemes Ombud Services Act  and Regulations and the Sectional Title Schemes Management Act  and Regulations affect me?

Both the Community Schemes Ombud Services Act and the Sectional Title Schemes Management Act came into operation on Friday 7 October 2016.

Community Schemes Ombud Services Act
The purpose of the Community Schemes Ombud Services Act (CSOS), is to provide for its mandate and functions and to provide for a dispute resolution mechanism in community schemes and for matters connected therewith.

Every owner within a Home Owners Association (HOA) and Sectional Title Scheme (ST) will have to pay a monthly contribution to the Ombud Offices, which contribution is payable within 90 days of the act coming into operation. Owners in a ST who live within a HOA will have to make two contributions, one for being a member of the ST and the other as member of the HOA.

Trustees are required to take reasonable steps in order to educate themselves about the scheme, its affairs and activities as well as all documents pertaining to the governance of the scheme. They must ensure that they have sufficient information in order to make decisions on matters pertaining to the scheme.

Trustees are required to attend all meetings including the AGM unless excused in writing by the chairperson. Take note that it is now possible to attend meetings electronically (for example via Skype).

Sectional Title Schemes Management Act
The purpose of the Sectional Title Schemes Management Act (STSMA), is to establish body corporates to manage and regulate sections and common property in sectional title schemes and to apply rules applicable to such schemes, to establish a sectional titles management advisory council and to provide for matters connected therewith.

Section 7 of the act states that the functions and powers of the body corporate must be performed and exercised by the trustees of the body corporate holding office in terms of the rules.

What are your duties as trustee?
Section 8 states that each trustee must stand in a fiduciary relationship to the body corporate and further goes on to explain that “fiduciary relationship” implies that a trustee must act honestly and in good faith.

• A trustee is required to exercise his powers in the interest and for the benefit of the body corporate and must not act without or exceed those powers.

• A trustee must avoid any material conflict between his own interests and those of the body corporate and may not receive any personal economic benefit, whether directly or indirectly, from the body corporate and must notify all trustees to the nature and extent of any direct or indirect material interest which he may have as soon as the trustee becomes aware of such interest.

Should a trustee act in breach of his fiduciary relationship he is liable to the body corporate for any loss suffered as a result thereof by the body corporate or any economic benefit received by the trustee as a result thereof.

Where a trustee has acted upon written approval of all the members of the body corporate and where such members were aware of all the facts, such trustees conduct will not be seen as a breach of his fiduciary relationship to the body corporate.

Part 2, Rules 5 – 8 deal with how trustees are nominated and replaced. A member may now nominate any person to be a trustee, therefore, it may be possible for a tenant to be nominated as trustee. Non-owner trustees may be remunerated for their services but only if approved by resolution of the Body Corporate.

Part 3, Rules 9 & 10 deal with general powers and duties of trustees and the validity of their actions. Trustees are required to meet in order to carry out their functions and that all meeting must be in terms of the common law of meetings.

Rules 11 – 14 deal with trustees and trustees meetings. Should a quorum not be present but a minimum of two trustees are present, the trustees present must take interim resolutions which must then be adopted by the trustees at their next meeting or by written resolution of all the trustees.

Form the aforementioned it is clear that being a trustee for a Body Corporate is an onerous position which must not be taken up lightly. Trustees must consider the scope of their knowledge before taking on such a responsibility and must consider that they will need to attend seminars or other forms of training in order to become familiar with their legal responsibilities.

Sascha Beck
Associate at Djv Inc

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