Advice and Opinion

Fiduciary duties of trustees in sectional title schemes

“While many tasks in sectional title schemes can be delegated to a managing agent, fiduciary duty remains with the trustees”, says Willem le Roux, director of the sectional title finance company Propell.

The duty of trust or fiduciary duty really means that the person responsible will exercise his powers in good faith and he will not act in his own interest or for another’s gain, but for the members (the owners of the sectional title units) he represents.

Trustees must disclose any conflicts of interest. Section 40(b) of the Sectional Titles Act states that “… a trustee shall avoid any material conflict between his own interests and those of the body corporate, and in particular-

(i) shall not derive any personal economic benefit to which he is not entitled by reason of his office as trustee of the body corporate, from the body corporate or from any other person in circumstances in which that benefit is obtained in conflict with the interests of the body corporate;
(ii) shall notify every other trustee, at the earliest opportunity practicable in the circumstances, of the nature and extent of any direct or indirect material interest which he may have in any contract of the body corporate.”

“If you act on behalf of another you have a duty to act with care. If you do not do this, you can be held liable for the loss suffered by members,” he said.

The trustees must, therefore display reasonable care and skill in managing the affairs of the body corporate.

The steps trustees can take to ensure they are qualified to execute their duties are to:

· familiarise themselves with the Sectional Titles Act and their schemes management and conduct rules;

· read one of the many how-to guides about sectional title;

· appoint a competent managing agent on whom they can rely for advice;

· appoint a company such as Propell that can help ensure that levies are raised correctly and that levy debt is collected without fear or favour.

A competent board of trustees is the secret to all successful schemes. Only people willing to act in the interest of all members should be elected as trustees. And once they are elected, trustees must equip themselves with the 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.