Friday, December 14

Voluntary role of trustee comes with a huge responsibility

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A competent board of trustees is, in fact, the secret to all successful schemes

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

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

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 sectional title unit owners – they represent. Once they are elected, they must equip themselves with the knowledge needed to perform their duties competently.

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“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 for any loss suffered as a result of his or her 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 as to how they should behave. He or she should:

* Act honestly and in good faith.

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

* Not exceed his or her powers.

* Avoid material conflict between his or her own interests and those of the body corporate – in other words not receive personal economic benefit from any decision made.

However, Hewitt says Prescribed Management Rule 8 (4) does provide some protection for trustees: “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.”

Rule 23 (7) stipulates: “A body corporate must take out insurance 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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