Trustees' prime responsibility is to ensure health of scheme

Sectional title body corporate members taking up their positions as trustees in their schemes (perhaps for the first time) have to accept that they have fiduciary responsibilities to their fellow members and the sectional title scheme as a whole, says Michael Bauer, general manager of the property management company, IHFM.

“Obviously,” said Bauer, “their prime responsibility will be to see that the financial position of the body corporate remains healthy. However, there is a great deal more to the role than that.”

In particular, said Bauer, the trustees must understand that, although a good managing agent is an invaluable asset to any sectional title scheme, the trustees are the “principals” in the relationship with the agent and certain duties will always be their responsibility even if the managing agent is actually handling the task.

“For example,” said Bauer, “the regular servicing of lifts is essential to the safety and success of any scheme. The managing agent has to see that this work is done but the trustees cannot simply leave it to him – they must also reassure themselves that the work is done on time and in conformity with the contract.”

Similarly, said Bauer, the maintenance of the fire prevention equipment and the regular paying and reviewing of the building insurance policy, and certain security and health issues are ultimately the trustees’ responsibility.

Asked if penalties can be imposed on a negligent trustee, Bauer said that the law recognises that most are unpaid volunteers in a position for which they may not have training. It therefore indemnifies them against prosecution on minor matters.

“If, however,” said Bauer, “it can be shown that a trustee has been grossly negligent or has committed fraud, the trustee will not be immune from prosecution.

“Although prosecution seldom happens, it should be borne in mind that it is possible and potential trustees should not accept the job if they know they are not willing and able to devote their full attention to their role as trustees.

Bauer said that the Prescribed Management Rules lay it down that trustees must meet within two weeks of the AGM and at that first meeting they must elect a chairman, determine what levies will be payable and – most importantly – by when, and agree on the interest rates to be charged on arrear payments for the year ahead.

In his experience, he said, if the trustees meet directly after the AGM, these matters can be decided quickly.

“If this is not possible and if the trustees are already in agreement on these matters it is acceptable to draw up a resolution covering the above items and then get trustees to sign it off one by one either after the AGM or by means of a “round robin” resolution,” said Bauer.

“Unless these matters are publicly and quickly resolved, there will be trouble with levy collections.”

Bauer commented that although the common practice is for levies to be paid monthly, they can be paid upfront annually or quarterly. In a few good schemes early payments have resulted in their actually having a credit balance on which interest is collected.

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