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Trustees in default

It is well known that as soon as an owner in a Sectional Title Complex gets elected as Trustee, he / she bears a fiduciary duty towards the Body Corporate and its members. It will normally be expected from the Trustees to lead by example when it comes to the payment of levies.

I have, however, dealt with various Bodies Corporate where the Trustees themselves are in default and owe thousands in arrear levies. Ironically enough, it is very often the defaulting Trustees who cause a lot of noise when the Body Corporate can’t settle its accounts with creditors, but remain silent when it comes to the defaulters list.

trustees default

Fortunately, the latest amendments made to the Regulations under the Sectional Titles Act, which came into effect on the 14th of April 2013, provide that it will no longer be possible for an owner, who is in arrears with his levy payments, to be nominated or appointed as a Trustee of the Body Corporate.

The amendments provide further that where a serving Trustee is in arrears for more than 60 days with any levies or contributions payable in respect of his / her unit or exclusive use area AND fails to bring such arrears up to date within 7 days of having been notified to do so, his / her appointment as Trustee will automatically lapse. It is important to note that the 7 days’ notice must be conveyed in writing to have the required effect.

I am sure there will be various questions or concerns one can raise with reference to the said amendments. I have, however, been confronted with a question how one should deal with a situation where a member or current Trustee own multiple units in a complex and is in arrears with his / her levy payments or contributions concerning one of the units being owned.

Prescribed Management Rule 2 (g) (i) provides that when it comes to the interpretation of the relevant rules words importing the singular number only, shall include the plural, and the converse shall also apply. Therefore it is possible to argue that an owner shall not be entitled to stand for nomination as Trustee if any levies or contributions payable by him in respect of his unit, alternatively any one of his multiple units, have not been duly paid.

A counter argument to the aforesaid can also be raised wherein it is submitted that an owner, who has settled his levies on only one of the multiple units being owned and who remain in arrears with the other units, can also be nominated as Trustee seeing that he is an owner of one duly paid unit.
It is clear that certain grey areas exist in the new amendments and the interpretation thereof should be tested in the applicable forum/s before the said questions can be answered with legal certainty.
I, however, support the view that a person would be disqualified to serve as Trustee where he is in arrears in respect of any unit owned by him.

The said amendments should, however, be regarded as a step in the right direction to ensure compliance with the Sectional Titles Act and Prescribed Management Rules. It was certainly the intention of the legislature that a Trustee, acting in a fiduciary capacity, should lead by example and should not be in arrears in respect of any of his units.

Article by Werner Loock

EY Stuart Attorneys
http://www.eyslaw.co.za

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