Trustees - ensure buildings are run in a business-like manner

Running a body corporate as a trustee is not all that difficult.

Mike Spencer from Platinum Global, says in essence, what is required is that the trustees should make sure that their building is run in a business-like way and that they comply with the requirements of the new Sectional Titles Management Act. The reality is that this is not hard to do. 

Duet owners should take more interest in their co-owner's unit, because if they allow themselves or their neighbour to build without proper approval, they may well find themselves in deep water. 

Spencer says like any business, the body corporate must be run as such that the income and expenses are properly managed. So a proper and fairly details budget is required, he says. 

"Although this was always a necessity, it is now enforced by the new budgeting methods and reporting that is required in terms of the new Act. This essentially means that if you have not done so before, as any prudent businesses should have done anyway, you now need to budget for current-, medium- and long-term repairs and maintenance," says Spencer. 

"Levies need to be set, taking your predicted expenses into account. All that changes is that you need to have a compliant long-term vision on repairs and bring your levies up to a level that allows you to achieve your financial goals."

An important aspect of trustees’ responsibilities is the need to ensure that your building is fully insured. Most trustees have successfully done this, but to avoid under provision for insurance, there is a need for three yearly replacement cost valuations. 

Spencer says this will be an additional cost and should be incorporated into your levy budget, with the cost spread over the three yearly budgets. Having looked at potential valuers to do this work, it is likely to cost as little as R2 per unit per month in larger schemes, though the ratio might be greater in smaller schemes. This work can be done by an architect, suitably sized builder, quantity surveyor or valuer who understands valuation of property for replacement cost. 

One of the emphasised duties of trustees will be to ensure that owners do not breach the rules of the body corporate. This is particularly the case with illegal alterations and extensions of the outside of units and into the common property.

Spencer says this would also apply to the situation where the building has previously been incorrectly managed, an example of which would be where parts of the building are independently run (a hotel or waterworks that simply do their own thing) or allowing owners to make unauthorised extensions or additions. 

According to Spencer, every trustee should take a close look around his building from time to time to ensure that it is safe, well maintained and nothing illegal has been done or added.

According to Spencer, every trustee should take a close look around his building from time to time to ensure that it is safe, well maintained and nothing illegal has been done or added. 

For example, would you be happy to allow an owner with a thatch roof to put a solar energy panel over his thatch?

Spencer says trustees need to be aware of the implication of doing alterations. In this instance, would it be legal or illegal to do so, is it a higher fire hazard, does it need building plans, will the insurance company be happy to allow it and who is going to cover the additional costs involved in maintaining the thatch? 

"Trustees need to know if their rules are actually valid and should obtain a copy from their local Deeds Office. Rules, as you should know, are only valid once they have been registered with the Register of Deeds," he says.

"An interesting point is that even duets registered as sectional title units need to be managed properly. Duet owners should take more interest in their co-owner's unit because if they allow themselves or their neighbour to build without proper approval, they may well find themselves in deep water." 

Spencer says selling a duet in a scheme will become more and more difficult. He says banks will ask for proper building plans. In order to sell your unit or get transfer, the banks could rightly refuse to give a bond or allow transfer to take place if the actual buildings are not the same as shown on the sectional title plans.

"And it won’t be your fault, but try getting your neighbour to get proper approved plans for the double garage he built illegally, especially if it was illegally designed or physically built," he says.

Spencer says the sectional title plans will need to be amended - all the things that you need to happen quickly while your neighbour has little or no interest in doing any of it, or maybe even the funds, to pay for the changes. 

“I would suggest that the same applies to small sectional title schemes under 10 units, where a similar management system is applied. I ask the question: could the trustees be held grossly negligent and personally liable if an owner is faced with undue delays in transfer and cost of bringing the building and sectional plans up to date in order to get his transfer through? I think that they could,” says Spencer.

"Bodies corporate are easy to manage if this is done in a business-like manner. On the other hand, they could become a nightmare for everyone if they are not."