Trustees are representatives of the body corporate that are appointed by the members of the body corporate at an annual general meeting.
When they are elected, they are the “public face” off the body corporate.
They are the people that the managing agents refer to when decisions need to be taken which are not day-to-day running decisions of the body corporate.
An example would be that the managing agents would pay the electricity and water accounts as received from the local authority, provided they were happy that the account was correct, without reference to the trustees, but would only approve payment for large contractors once the trustees have signed off on the work done.
Trustees are there to manage the maintenance of the building or complex.
This would include maintenance items sometimes for quite large sums.
The trustees would, in my opinion, be able to decide to re-do major parts of the boundary electric fence where this is necessary because the insulators were aged and the fencing shorting-out on a regular basis.
Trustees are not able to approve improvements or additions without following the procedure as set out in the Sectional Titles Schemes Management Act (STSMA).
In my opinion, all owners should be involved in decisions about spending money in their building – after all, it is their money and their levies that pay for the new features.
The way that it should work is either for the proposal to be on the agenda for a special general meeting, budget or the AGM at which all owners participate and conclude that the improvements are acceptable.
Then there can be no unhappiness from owners.
Alternatively, the trustees can send out a notice of at least 30 days to all owners explaining what they intend to do.
The notice must include the cost of the improvements, the reason why the trustees think that it is important to do the upgrades, how the upgrades are going to be funded and what effect, if any, it will have on the owner’s levies and/or a special levy.
Owners must be given 30 days to answer.
If there are no objections then the trustees can go ahead with the improvements, but if there are objections, even one, then a special general meeting must be called to approve the improvements.
Trustees must be aware that not all the money in the bank is available to spend.
The value of deposits – water and electricity, satellite dishes and the like – is there as security against the owner/tenant fixing any problems when they move out.
Levies and service fees in advance cannot be spent or taken into account.
Importantly, trustees must understand that long-term reserve funds are there only for the purpose that they were intended for and are what is called ringfenced reserves.
This is a requirement of the STSMA.
The funds cannot be touched except in very exceptional circumstances and any money used from these accounts can only be used for the specified purposes.
This means that trustees cannot “borrow” money from the painting reserve to do replacement of wooden window frames, nor can that money be used to fix the electric fence – no matter how urgent or important that other repair is.
All money spent from the reserve fund must be approved by the trustees in the form of a specific resolution of trustees.
So, if the replacement of the electric fence costs R250 000 and you have R250 000 in the bank, you first need to take into account the advance payments, deposits and the like and then also take into account the projects that have already been approved and need funds.
Only the balance of the general reserves can be spent, provided a sensible amount is retained for current running expenses – usually equal to one month of normal levies.
It can happen that physically you have enough money to do whatever you want to do, but not if you take into account the reserve funds, the advance payments and deposits and the ringfenced long-term savings.
If you need assistance or advice regarding allocation of funds you are welcome to me at mike@platinumglobal.co.za
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.