Advice from IHFM – Fiduciary responsibility and complying with rules and regulations

As in running a business (which running a sectional title scheme can often be compared to), there are multiple laws and acts that apply and often there are many changes made to the rules of running it.

“As a trustee, you’re effectively the boss, and must ensure that your scheme complies with health and safety rules, are tax compliant, has sufficient insurance and has the fire equipment serviced regularly, just to give a few examples,” said Michael Bauer, general manager of the property management company IHFM.

There are basic things that have to be checked on a monthly basis, for example, are the lifts working properly and serviced regularly?

When it comes to complying with health and safety laws there are also procedures that must be followed.

If a contractor is hired, for instance, they need to receive an indemnity form and a copy of the health and safety regulations to ensure that the body corporate is not held liable for any accident that might occur. Disclaimer notices posted throughout the sectional title building are not enough if an accident were to happen, said Bauer. There are many schemes were this is not being done, because it can become time consuming, and this is a cause for concern.

“A classic example of where something could go wrong is where a contractor is hired and needs scaffolding but instead of hiring this he just uses a long ladder, which can be dangerous. If something had to happen to the labourer, the body corporate would be held accountable if the necessary indemnity form is not completed,” said Bauer.

There are many day to day maintenance jobs that require the use of dangerous equipment such as lawnmowers and weed trimmers, where if an accident were to happen, it could mean the loss of a finger or eye. Health and safety rules are meant to be adhered to avoid accidents but if they should occur, the body corporate must have covered itself.

Another very important task is to make sure that the body corporate is registered as a taxpayer and is fully up to date. Although bodies corporate are usually tax exempt and submit a nil return and will not be paying any tax, because they are not for profit organisations, they still have to pay on the non-levy items if the amount exceeds R50 000.

What often happens is that the managing agents of the scheme, having not registered the body corporate as a taxpayer, will then list the employees of the body corporate under their own books and this should not be done. The body corporate must have separate financial and payroll documents, said Bauer.

Compliance in terms of tax laws and workmen’s compensation is important if bodies corporate have direct employees, he said.

“These are the basics in terms of any trustee’s fiduciary responsibilities,” said Bauer. “Cover the basics by double checking the main items such as proper insurance, health and safety requirements and that the financials are healthy. In doing so most of the important items in the scheme will have been covered.”