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Can trustees be paid?

Originally published on Paddocks

By Ané de Klerk

Having worked closely with countless trustees over the past 4 years, I can confidently say that most of them have one thing in common – a frustration with the thankless position they find themselves in. If you have ever served on a body corporate’s board of trustees you will know that the job comes with certain, shall we say “undesirable” tasks, including attending after-hours trustees meetings, taking late-night phone calls regarding out of order lifts or broken gates, trying to stay on top of a constant influx of scheme-related email correspondence and, most importantly, attempting to safely navigate through all the hoops that legislation has trustees jumping through… all of which often seem to go unnoticed and unappreciated by fellow members of the body corporate. It, therefore, comes as no surprise that Paddocks has recently been inundated with queries regarding trustee remuneration. Let’s take a closer look at the idea and the legalities around it.

Who can be trustees?

As a point of departure, it is important to be mindful of the fact that a board of trustees can consist of both members and non-members of the body corporate. Prescribed Management Rule (“PMR”) 6(1), contained in Annexure 1 of the Regulations to the Sectional Titles Schemes Management Act (“STSMA”), stipulates that “a trustee need not be a member”, while PMR 7(1) states that “a member may nominate any person for the office of trustee”. The only persons who may not be elected as trustees are non-members who are also “the managing agent or an employee of the managing agent or the body corporate”.

Is it legal to pay trustees for their services?

In terms of PMR 8(2), trustees who are members of the body corporate can be remunerated if the remuneration is authorised by a special resolution of owners.

Where should the body corporate get the money to pay the trustees?

Practically, there are 2 ways of recovering the cost of trustee remuneration from members. The first is to incorporate the cost into the body corporate’s administrative budget and therefore include it in the monthly contributions levied to owners; however such budget can only be considered and approved at the body corporate’s Annual General Meeting (“AGM”). This method can therefore not be utilised throughout the remainder of the body corporate’s financial year.

The second possibility is for the trustees to raise a special contribution in terms of section 3(3) of the STSMA and PMR 21(3)(a) for this expense, which is necessary but was not budgeted for in the estimated expenditure approved at the last AGM. As the trustees’ power to raise special contributions is limited to such contributions required to cover necessary and unbudgeted expenses, it is of the utmost importance that a special resolution first be properly passed by the members before the trustees implement the special contributions. Without such duly passed special resolution, the expense cannot reasonably be regarded as “necessary”.

What about trustees who are not members of the body corporate?

It is important to note that this second option above is not available to the body corporate if they wish to remunerate trustees who are not members of the body corporate. According to PMR 8(3) these trustees may only be remunerated if the cost of such remuneration is included in the body corporate’s administrative budget, duly approved by an ordinary resolution of members at the AGM. Therefore, no special contributions may be raised to pay non-owner trustees for their services.

While the notion of volunteer trustees who selflessly offer up their free time for the greater good of the body corporate is a noble one, I fear that this breed of trustee is a dying one. With trustees’ duties and responsibilities being plenty and those willing to take on the task few, body corporates may wish to consider the possibility of paying their trustees a minimal amount for their services in order to prevent having to pay an executive managing agent a substantially greater amount for performing the same duties and taking on the responsibilities that owners would happily have taken on at a fraction of the cost.

 

Should you have any questions with regards to trustee remuneration or require assistance with the drafting of the special resolution authorising such remuneration, contact us at info@theadvisory.co.za for a no-obligation quote.

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