What happens if all the trustees of a sectional title scheme resign? Who is then in control of the management, and who is entitled to continue exercising the function and powers of the body corporate, which is entrusted to the trustees by virtue of the Sectional Title Schemes Management Act 8 of 2011 (STSMA)? The answer lies in the question, namely the body corporate.
Prof CG Van der Merwe describes the body corporate as consisting of the aggregate of sectional owners, and is the central administrative body provided by the legislature for the management of the scheme.
Upon the date upon which any other person other than the developer becomes an owner, there is deemed to be established for that scheme, a body corporate. The body corporate is subject to the provisions of the STSMA, responsible for the enforcement of the rules and for the control administration and management of the common property for the benefit of all the owners. A body corporate continues to exist until such time as its affairs are wound up and it is dissolved pursuant to an order to that effect by the High Court.
No sectional owner can revoke his membership in the body corporate, and they remain a member until they cease to be an owner of a unit in the scheme. It is therefore obvious that the resignation of the trustees will not bring an end to the body corporate. There are a few options available to the owners of units to ensure the continued functioning of the body corporate, now that the trustees have resigned from office, namely:
- Call a special general meeting in order to appoint replacement trustees. In order to convene a meeting, the owners entitled to at least 25% of the total of the quota of all sections, can convene the meeting by giving 14 days’ notice to all the owners. The notice must include the motion for discussion, which must be included in the agenda for the meeting. Should all the members waive their right to the meeting and consent to the resolution, then the rules provide that the meeting does not have to be held and that the resolution will be so passed. If not, the meeting must be held and the resolution must be voted upon. The appointments will not require a special or unanimous resolution, a simple majority will suffice. The replacement trustees will serve until the next annual general meeting. The replacement trustees then continue as the trustees and must perform the duties and functions entrusted to them; or
- The body corporate can, by way of a special resolution, appoint an executive managing agent to perform the functions and exercise the powers that would otherwise have been performed and exercised by the trustees. Alternatively, the owners entitled to 25% of the total quota of all the sections can apply to the Community Schemes Ombud Service for the appointment of an executive managing agent.
The Act provides that: the executive managing agent is subject to all the duties and obligations of a trustee under the Act and the rules of the scheme; is obliged to manage the scheme with the required professional level of skill and care; is liable for any loss suffered by the body corporate as a result of not applying such skill and care; has a fiduciary obligation to every member of the body corporate; must arrange for an inspection of the common property at least every six months and must report at least every four months to every member of the body corporate on the administration of the scheme.
The Act furthermore provides the extent of the details to be included in the reports as referred to above. The list is extensive and includes amongst other things: proposed repairs and maintenance of the common property and assets of the body corporate; any matter relevant to the condition of the common property; the balance of the administrative and reserve funds of the body corporate and a reconciliation statement of the funds; for the period of appointment the expenses of the body corporate, including repair maintenance and replacement costs and a brief description of the date and nature of all decisions made by the executive managing agent.
The only issue detracting from the appointment of an executive managing agent will be the cost involved. The executive managing agent will charge a fee which will usually be higher than that of managing agents due to the extent of the work as a result of any ineffectiveness or maladministration of the existing trustees; or
- Finally and possibly the most intrusive and costly, in that it involves a court application, is the appointment of an administrator. If there is evidence of serious financial or administrative mismanagement of the body corporate and if there is a reasonable possibility that if placed under administration it will be able to meet its obligations and be managed in accordance with the Act, the Magistrates Court will appoint an administrator for a fixed period. An application can be made by the body corporate, a local municipality, a judgment creditor, any owner or a person having a registered real right in or over a unit for the appointment of a suitably qualified and independent person to serve as an administrator.
The administrator has, to the exclusion of the body corporate, such powers and duties as the Magistrates Court direct and must exercise these powers to address the body corporate’s management problems as soon as is reasonably possible.
They must convene and preside at meetings and lodge with the Ombud copies of notices and minutes of meetings and written reports on the administration process every three months or at such intervals as the court may determine. The court can on application by the administrator or those parties referred to hereinbefore, remove, replace, extend the term or amend the terms of appointment of the administrator and make any order for payment of costs.
Prof CG van der Merwe states that there are certain factors which militate against such an appointment. The legal costs of appointment are high and might not be attainable for smaller schemes. Administrative costs will increase to remunerate the administrator. Furthermore, there is a shortage of suitably trained and independent persons to be appointed as administrators.
For the reasons as set out hereinbefore, there is little choice for the owners in a small scheme, in my opinion, those comprising 20 or fewer units, other than to call a special general meeting for the appointment of replacement trustees. If the individual differences of the owner are impossible to reconcile, then the option to approach the Ombud for the appointment of an executive managing agent will be the next best route to follow.
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