The trustees of sectional title schemes are often at this time of year preparing for their most important meeting, the Annual General Meeting, at which they come face to face with body corporate members.

The majority of sectional title schemes’ financial years end on the 28th February. Trustees are by law required to get their auditors to finalise their schemes’ audited financial statements four months after the end of the year and are then required to follow up with an Annual General Meeting at which the body corporate members have the opportunity to review key issues with the trustees and their managing agent.

Michael Bauer, General Manager of IHFM, a Cape based firm specialising in sectional title management, says that the AGM has to take place by law within four months of the financial year end. The Prescribed Management Rules also stipulate that notice of the AGM has to be given at least 14 days ahead of the date and that this notice must contain all supporting documents for the AGM, thereby giving members the chance to consider these in detail prior to the meeting and ensuring transparency and a more productive meeting.

It is, said Bauer, compulsory that certain issues have to be discussed at every AGM. These are:

1. the financial statement and auditor’s report; and

2. the gaining of approval, with or without amendment, of the following

a. the schedule of replacement values,

b. the estimate of income and expenditure,

c. the appointment of an auditor or accounting officer,

d. the determination of the number of trustees to run the scheme for the next year,

e. the election of the these trustees,

f. any special business of which notice has been given,

g. the directions and restrictions by which the trustees will have to operate in the year ahead,

h. the determining of the address from which the body corporate will operate,

i. confirmation by the auditor or the accounting officer that any amendment of the rules has been submitted to the Deeds Office.

In any sectional title scheme, said Bauer, there will be a tendency for body corporate members not to attend the AGM, but in his experience, this can be disastrous. If, says Bauer, it is genuinely difficult for owners to attend the AGM, they should appoint a proxy to attend and vote on their behalf. Where no proxy is available it is acceptable for an owner to delegate his vote to the chairman. It is also acceptable for the chairman or a member to canvass members’ votes by means of proxies and many important decisions have been passed at AGMs on this basis.

Non-attendance by members or their proxies, says Bauer, can lead to serious consequences, especially if at the first meeting the required quorum of members is not achieved. In these circumstances, he said, the trustees are obliged to re-adjourn another meeting within seven days at the same time and the same place. At this meeting the quorum requirements will no longer apply.

“It can, therefore, happen that, without the actual consent of the body corporate members, a handful of members and/or trustees pass a resolution for a significant alteration to the scheme, the raising of a loan or other measures which will require a big increase in the annual levy or could impact on the financial stability of the body corporate. It is also quite possible under these conditions that substantial sums already paid out will go unquestioned.”

Frequently, said Bauer, owners with a grievance will try to use the AGM as a forum for airing their problems, e.g. that the managing agent did not do this or that or that the resident in unit x still plays loud music at midnight.

“The trustees and managing agent,” says Bauer, “must resist these attempts to divert discussion from the prescribed agenda. If they do not, more important matters will be overlooked and disastrous or meaningless AGMs will simply ensure that less members attend the following AGM.”

Trustees should therefore deal with individual complaints in trustee meetings or on a one-on-one basis.

Article by: www.ihfm.co.za