In South Africa, sectional title complexes are governed by a Body Corporate, which comprises all the owners collectively. The Body Corporate appoints trustees—usually owners elected at the Annual General Meeting—to manage and oversee the scheme on behalf of all owners. Trustees hold a position of trust and are legally obligated to act honestly and in the best interests of the Body Corporate.
Core Responsibilities of Trustees
Trustees are responsible for the overall management, administration, and financial oversight of the sectional title scheme. Their duties include:
Financial Management: Ensuring levies are collected fairly and on time, managing the Body Corporate’s bank accounts, paying expenses according to budget, investing surplus funds, and preparing financial statements and reports for owners.
Maintenance and Repairs: Overseeing the upkeep, maintenance, and repair of common property and shared facilities to preserve the value of the complex.
Insurance: Ensuring the complex is adequately insured against risks such as natural disasters to protect owners’ investments.
Governance and Compliance: Enforcing the scheme’s rules, ensuring owners and tenants comply with the Sectional Titles Act and the Body Corporate’s regulations, and managing meetings and record-keeping.
Managing Agents and Employees: Supervising any managing agents or employees appointed to assist with the scheme’s administration and physical management.
Trustees must act transparently and can be held accountable by owners if they fail to perform their duties properly.
The Role of the Managing Agent and Its Distinction from Trustees
A Managing Agent is appointed by the trustees to assist with the administrative and financial management of the Body Corporate. The managing agent’s role is primarily administrative and financial, including:
- Levy collection and accounting
- Record keeping and reporting
- Arranging meetings and preparing minutes
- Assisting with financial statements and budgeting
- Coordinating insurance and legal compliance
However, a managing agent does not typically perform the physical management of the complex, such as day-to-day maintenance inspections, repairs, or cleaning. These operational tasks remain the trustees’ responsibility or are contracted out separately. Some managing agents may offer physical management services, but this is usually only when the Body Corporate pays an additional Executive Management fee beyond the standard managing agent cost.
How do trustees ensure the body corporate’s finances are managed responsibly
Trustees ensure the Body Corporate’s finances are managed responsibly through a combination of diligent oversight, strict adherence to legal and financial frameworks, and transparent governance practices:
Budget Preparation and Monitoring: Trustees prepare an annual budget forecasting all income (levies) and expenditure, carefully considering all operational and maintenance costs. They regularly monitor the financial position against the approved budget to avoid overspending and ensure funds are used as intended.
Levy Collection and Arrears Management: They ensure that all owners pay their levies on time, which is the primary source of the Body Corporate’s income. Trustees actively follow up on arrears to maintain cash flow and financial stability.
Segregation and Proper Use of Funds: Trustees oversee the correct banking and allocation of funds into the administrative fund (for day-to-day expenses) and the reserve fund (for long-term maintenance and capital expenses). They ensure that spending from these funds complies strictly with legal restrictions and trustee resolutions.
Investment of Surplus Funds: Where applicable, trustees invest surplus funds prudently in secure, low- or medium-risk financial instruments, following any restrictions or directions set by the Body Corporate to protect the capital and generate reasonable returns.
Insurance and Risk Management: Trustees ensure the Body Corporate has adequate insurance coverage, including fidelity insurance to protect against fraud or dishonesty by trustees, managing agents, or employees.
Delegation and Controls: Trustees may delegate certain financial powers in writing with clear limits and conditions to protect the Body Corporate from misuse of funds. They also implement restrictions on spending thresholds requiring broader Body Corporate approval.
Transparency and Reporting: Trustees prepare and present detailed financial statements and reports at the Annual General Meeting, including income, expenses, and future maintenance plans, ensuring owners are informed and can hold trustees accountable.
Fiduciary Duty and Ethical Conduct: Trustees must act honestly, in good faith, and avoid conflicts of interest. They must exercise independent judgment and act in the best interests of all owners, ensuring financial decisions are ethical and transparent.
Engagement of Professionals: When necessary, trustees engage qualified professionals such as managing agents, financial advisors, or attorneys to assist with compliance, financial management, and governance, but remain ultimately responsible for oversight
Standard Management Levy vs. Executive Management Levy
The Management Levy is the regular monthly contribution paid by owners to cover the standard costs of running the Body Corporate, including administration, financial management, insurance, and basic maintenance.
In contrast, an Executive Management Levy is an additional charge that covers enhanced services such as:
- On-site executive management or caretaking
- Day-to-day physical management and supervision of the complex
- More comprehensive maintenance and security oversight
This levy is optional and only applies if the Body Corporate decides to employ executive management services beyond the standard managing agent functions.
Conclusion on the Responsibilities of a Trustee in a Sectional Title Complex
Trustees play a crucial role in safeguarding the interests of all owners by managing the finances, maintenance, insurance, and governance of a sectional title complex. While managing agents support trustees with administrative and financial tasks, they do not replace the trustees’ responsibilities for physical management unless an Executive Management fee is paid. Understanding these distinctions and the levies involved helps owners appreciate how their sectional title complex is managed and ensures accountability at every level.
