Fiduciary duties of sectional title trustees

Although many duties in sectional title schemes can be delegated to a managing agent, the trustees still retain overall responsibility for maintaining of the property, and the financial well-being of the body corporate, says Johann le Roux of Propell. Propell that provides various finance options for sectional title bodies corporate.

The fiduciary duty – duty of trust – requires trustees to exercise their powers in good faith on behalf of the owners of the sectional title unit owners they represent. Therefore, they may not act in their own interest or for the gain of another. Trustees who don’t adhere to this principle can incur liability for misconduct. They may also be held liable for losses suffered by other unit owners.

Trustees must display reasonable care and skill in handling the management and financial well-being of the scheme they represent and work for. They must also disclose any possible conflicts of interest.

Section 40(b) of the Sectional Titles Act states that “… a trustee shall avoid any material conflict between his own interests and those of the body corporate, and in particular:

(i) shall not derive any personal economic benefit to which he is not entitled by reason of his office as trustee of the body corporate, from the body corporate or from any other person in circumstances in which that benefit is obtained in conflict with the interests of the body corporate;

(ii) shall notify every other trustee, at the earliest opportunity practicable in the circumstances, of the nature and extent of any direct or indirect material interest which he may have in any contract of the body corporate.”

Steps

Le Roux says a competent board of trustees is the secret to all successful sectional title schemes.

“Only people willing to act in the interests of all members should be elected as trustees. And once they are elected, trustees must equip themselves with the knowledge needed to perform their duties competently. Knowledgeable trustees who steer clear of conflicts of interest can never be accused of having breached their fiduciary duty,” says le Roux.

The measures trustees can take to ensure they are qualified to perform their duties include:

• Familiarising themselves with the Sectional Titles Management Act and the management and conduct rules for their schemes.
• Reading one or more of the many available sectional title guides.
• Attending regular sectional title seminars, workshops or online courses.
• Appointing a competent managing agent on whom they can rely for advice.
• Appointing a managing agent company to help ensure that levies are raised correctly, and that the levy debt is equitably collected.

Trustees can contribute to the change for the better in their schemes and are personally able to influence the how schemes are operated and the level of success. They are accountable, to a large extent, for the success or failure of a scheme, says le Roux.

Writer : Sarah-Jane Meyer