Consumer Information

Author: STONEWOOD Property Management
17 November 2020

WHAT ARE THE ROLES AND RESPONSIBILITIES OF TRUSTEES?

Appointing body corporate trustees is one of the most important decisions that the members of the scheme must make every year. Trustees should have the relevant knowledge and management skills, and they should also be able to carry out their responsibilities in a way that benefits the scheme.

The selected trustees do not always have carte blanche when making decisions for the body corporate; often, other members must be involved in the decision-making process.

Let’s consider the various duties and responsibilities of the trustees:

The fiduciary duty and conduct of trustees

The fiduciary relationship between trustees and body corporate members is best explained as a relationship of trust. This means that the trustees must always act in good faith and in the best interest of the body corporate, i.e. they cannot be seen to act in any way that their actions benefit themselves instead of the body corporate. They are not allowed to exceed the limitation of the power granted to them and must avoid any material conflict between their own interest and that of the body corporate.

These basic aspects of responsibility and trust must be considered when accepting an appointment as a trustee. Trustees can be held liable in their personal capacity for any losses suffered by a body corporate resulting from their actions.

What are the roles and responsibilities of trustees?

The roles and responsibilities of trustees may vary from one scheme to another. When trustees find themselves dealing with tasks where they lack the necessary knowledge or expertise, it is perfectly acceptable to outsource or consult external experts for professional assistance or guidance.

The main roles and responsibilities of trustees are financial management, maintenance management, budgeting of funds, and the management of the rules of the scheme.

1. Financial management
This involves managing the scheme’s finances including preparing the budget, ensuring the levies are calculated and billed correctly to all owners, following up on arrear levies, paying creditors, ensuring the scheme is insured sufficiently and preparing the annual financial statements.

Two of the most important aspects of the financial management for which the trustees are responsible, are preparing the annual administrative budget and putting together a 10-year maintenance plan which will allow the trustees to prepare the reserve fund budget. These budgets will determine the monthly levies.

The trustees may not necessarily attend to all the above duties themselves but will employ a managing agent who can assist them with these functions.

2. Maintenance management
The responsibility to maintain the scheme’s common property lies with the trustees. The trustees are responsible for allocating sufficient financial resources for such maintenance, both short and long term.

Legislation requires that a 10-year maintenance plan must be in place for long-term maintenance expenses of a capital nature. Planned monthly and even unexpected day-to-day expenses must be budgeted for in the scheme’s administrative budget.

3. Scheme rules
The rules of the scheme must be reviewed continuously, allowing for any necessary changes or amendments. This will keep the rules dynamic and relevant, reflecting both legislative changes and the unique needs of the scheme’s residents.

Trustees must also ensure that the residents adhere to the rules and when in breach, that the issue is addressed with the relevant party.

4. Record keeping
Other than the above, the trustees are responsible for the safekeeping of all the body corporate records and must ensure that it is regularly updated with any changes.

Restrictions on trustee actions

Although the trustees have a certain level of power and authority to take decisions on behalf of the scheme, there are limitations to their authority.

Trustee decisions are typically taken based on a majority vote. This means that when the trustees take a decision the majority of the trustees must be in favour for such a decision for it to be passed. No single trustee or minority of trustees may take any decision or implement any actions if the majority of the trustees have not approved it. All trustee decisions must always be accompanied by a signed trustee resolution to validate it.

Trustee decisions are also limited to restrictions or instructions as provided by the members at a general meeting. An example of such a decision may be that the trustees wish to employ a security company at the complex, but the members limit the monthly cost to a certain amount.

A further restriction that trustees need to always be aware of is that they are not allowed to spend more than what has been approved in the annual budget. They are further limited from incurring any expenses that have not been provided for in the budget.

Conclusion

It is important to remember that trustees act and serve in the interest of the members in their scheme. Their decisions and actions must always be taken in good faith and without any undue financial benefit accruing to themselves.

While the trustees are appointed to manage the affairs of the scheme and the common property, it does not give them unlimited authority to do as they wish.

Knowledgeable trustees, who perform their duties within the confines of the relevant legislation and to the expectations of the members, will inevitably result in a well-managed scheme and satisfied members.

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