Sectional title trustees: are they still responsible for the scheme’s affairs after the managing agent has been appointed?

By Estate Living - 30 Oct 2018

Advertisement

3 min read

Trustees’ functions and responsibilities

A competent board of trustees is the secret to all successful schemes. Only people willing to act in the interest of all members should be elected and, once they are, trustees must equip themselves with the knowledge needed to perform their duties competently. The tasks and responsibilities that the law rests on the shoulders of trustees include that they must arrange insurance and set up meetings; keep records of minutes of meetings; enforce rules, maintain the common property, compile income and expenditure schedules; arrange for the compilation of annual financial statements compilation; collect levies, invest funds, and more. In performing these duties, trustees owe a fiduciary duty towards their scheme. This means that the person responsible will exercise their powers in good faith and will not act in their own interest or for another’s gain, but for the owners in the scheme. The Sectional Title Schemes Management Act (STSMA) specifically instructs that in their conduct of affairs, trustees must: act honestly and in good faith; exercise their powers in the interest of the body corporate; must not exceed the power given to them; must avoid any material conflict between his or her own interests and those of the body corporate.

Any trustee who acts in breach of this fiduciary relationship can be held liable to the body corporate for any loss suffered as a result of their actions.

For various practical considerations, such as a lack of knowledge regarding scheme management and time constraints, trustees who were elected from the general body of owners in a sectional title scheme (the body corporate), often choose to appoint a managing agent to manage the scheme in their stead.

Managing agent appointment

A managing agent is a person or company who is appointed by the trustees to assist with their duties, and act on their behalf in the administration of the scheme. The role of the managing agent is usually mainly administrative and financial in nature and is generally set out in a service agreement entered between the trustees and the managing agent. The managing agent only has such powers and duties as are imposed in the agreement. This means that the content of a managing agent’s duties may differ from scheme to scheme.

Who carries the fiduciary duty?

The question that arises is who carries the responsibility to fulfil the fiduciary duties that cling to the office of a trustee, in the instance where the trustees have appointed a managing agent. In terms of the law, trustees owe a fiduciary duty to the sectional title scheme.

The question that arises is who carries the responsibility to fulfil the fiduciary duties that cling to the office of a trustee, in the instance where the trustees have appointed a managing agent. In terms of the law, trustees owe a fiduciary duty to the sectional title scheme. The law is clear on this. The trustees retain the fiduciary duty towards the owners (body corporate) and as such must ensure that the managing agent properly performs the tasks ascribed to them. Any tasks not handed to the managing agent to perform, must still be dealt with by the trustees. Therefore, even where a managing agent is involved, the trustees must remain actively involved in the decision making and management of the scheme. (Note that the position is different where an executive managing agent is appointed. This is a newcomer – the STSMA introduced this appointment for the first time in October 2016. Such an agent is appointed, in terms of a management agreement, to perform the functions and to exercise the powers that would, in the normal course of events, be performed and exercised by the trustees. The executive managing agent effectively steps into the shoes of trustees and takes over their duties and responsibilities in full.)

www.stbb.co.za

COMMERCIAL LAW | CONVEYANCING | CONSTRUCTION LAW | DEVELOPMENT LAW LABOUR LAW | ESTATES | FAMILY LAW | LITIGATION | PERSONAL INJURIES & 3RD PARTY CLAIMS

Cape Town 021 406 9100 | Blouberg 021 521 4000 | Claremont 021 673 4700 Fish Hoek 021 784 1580 | Helderberg 021 850 6400 | Tyger Valley 021 943 3800 Bedfordview 011 453 0577 | Centurion 012 001 1546 | Fourways 010 001 2632 Illovo 011 219 6200 | East London 043 721 1234

Advertisement

Share this

Leave a Reply

Your email address will not be published. Required fields are marked *


 

Scroll to Top
Processing...
Thank you! Your subscription has been confirmed. You'll hear from us soon.
Subscribe to our mailing list and receive updates, news and offers
ErrorHere