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'Trustees vital for success'

31 May 2018

While the role of trustee in a sectional title scheme is a voluntary and unpaid position, it is one that comes with huge responsibility.

A competent board of trustees is the secret of all successful schemes, so says Chinelle Hewitt, operations manager at sectional title finance company Propell. Only people willing to act in the interest of all members should be elected.

She says trustees have a fiduciary duty towards their scheme, and need to exercise their powers in good faith, not acting in their own interests or for another's gain, but for the people - the owners of the sectional title units - he or she represents.

Once trustees are elected, they must equip themselves with 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. Any trustee who acts in breach of his fiduciary relationship can be held liable to the body corporate for any loss suffered as a result of his actions."

Section 8 of the Sectional Title Schemes Management Act refers to the conduct of trustees and the way they carry out their duties, and gives a clear instruction in the way a trustee should behave. A trustee should:

Act honestly and in good faith.

Exercise his or her powers in the interest of the body corporate.

Not exceed the power given to him or her.

Avoid any material conflict between his or her own interests and those of the body corporate. In other words, a trustee must not receive any personal economic benefit from any decision made.

However, Hewitt says Prescribed Management Rule 8 (4) of the regulations does provide some protection for trustees by stating: "The body corporate must indemnify a trustee who is not a managing agent against all costs, losses and expenses arising as a result of any official act that is not in breach of the trustee's fiduciary obligations to the body corporate."

Furthermore, PMR 23 (7) stipulates: "A body corporate must take out insurance for an amount determined by members in a general meeting to cover the risk of loss of funds belonging to the body corporate or for which it is responsible, sustained as a result of any act of fraud or dishonesty committed by a trustee, managing agent, employee or other agent of the body corporate."

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