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Trustee roles, responsibilities, governance objectives and effective decision making recommendations

The guidelines to follow are written as an executive summary aimed at enhancing the effectiveness and decision- making time efficiency of the board of trustees, together with creating expectations in terms of governance milestones and decision- making turnaround times.

Important governance milestones:

Effective, punctual and comprehensive governance is a critical success factor for a body corporate and board of trustees. The topics listed below cover the important criteria and timing expectations which should be facilitated and achieved by the Trustees with the significant assistance of Trafalgar as the managing agent:

AGM’s: these must be convened within 4 months of the financial year end. Delays may result in the body corporate auditor qualifying the audited financial statements and importantly levies are not correctly adjusted to increased expenses from the beginning of the new financial year resulting in higher levy increases when the AGM is convened.

Consistently prompt AGM’s can easily be achieved by quickly reviewing and finalising the draft audited financial statements which should be ready for confirmation within 2 months of the financial year end. Two Trustees are required to sign-off the audited financial statements (“AFS”). A new budget should be approved and sign-off by 2 Trustees well before the financial year end and a Trustees report should be prepared and signed in line with signing-off the AFS. See also the 10-year maintenance plan dependency described further below.

Budgets: Trafalgar’s accounting team will prepare a draft budget for discussion and approval in the 10th month of the financial year. This will allow a levy adjustment effective in the 1st month of the new financial year (the Trustees are authorised to increase the levies by up to 10% via a Trustees resolution) to cover forecast expenses. The draft budget will also recommend a 2nd levy adjustment in the month following the AGM where the budget is formally approved, if necessary. The approved budget will need to be signed by 2 Trustees for inclusion in the AGM Agenda pack. A budget review meeting is recommended to initially review and “Trustee approve” the proposed budget, once the Financial Trustee has completed a first review and first round amendments with the portfolio manager. The monthly management reports will note above the income statement whether the budget is Trustee or AGM approved as the basis for the income to budget variance report.

An AGM date, venue, time and draft agenda should be provisionally agreed with the budget approval, noting that 2 weeks’ notice will be required for AGM’s without special resolutions, otherwise 30 days notice is required to approve a special resolution included in the agenda.

10-year maintenance plans: this is a requirement of the new Sectional Title Schemes Management Act (STSM Act) and is necessary to present at the AGM together with related preventative maintenance work carried out over the past year and planned for the year ahead. It is recommended that a specialist prepare the initial 10- year plan from where annual updates can potentially be managed by the Trustees. Trafalgar can assist with quotes to update the 10- year maintenance plan and reports showing preventative maintenance completed over the prior year to present at the AGM.

Insurance: the common property and related improvements must be insured in terms of the STSM Act. A specialised sectional title insurance policy and broker are recommended to achieve important benefits such as Trustee indemnity cover, public liability cover and landslide cover (new legislative requirement) which are relevant to sectional title schemes. The insurance policy schedule is a standard agenda item for approval at the AGM.

Insurance replacement valuation: a survey report from a registered specialist is required every 3 years and will provide an opportunity to validate the insurance cover and replacement value parameters for the building. The body corporate’s insurance broker will be able to assist and facilitate. Please check with your portfolio manager when the last survey was completed.

Community Schemes Ombud Service (CSOS): After initial CSOS registration, CSOS Annual Returns need to be submitted shortly after the AGM. A standard form together with the AGM Minutes and levy schedule need to be submitted to CSOS. Trafalgar will manage this process and confirm completion as part of the annual CSOS administration function. In addition, CSOS levies are required to be paid quarterly to CSOS and Trafalgar will manage these payments in line with the AGM approved budget and levy schedule. Trafalgar will assist with any CSOS mediations and adjudications on a time- based fee agreed with the Trustees in advance if representation is required. It is important also to confirm that a certificate has been obtained confirming that customised conduct rules have been correctly registered with CSOS which is necessary for enforcing the rules.

Tax: all bodies corporate are required to be registered with SARS and an annual tax return must be submitted following the sign-off of the AFS. SARS requires the appointment and registration of a public officer as part of the tax registration process. Trafalgar offers this service and oversees tax compliance as part of the public officer role. Alternatively, a Trustee or auditor may cover this function and SARS will require ID, FICA documents and a personal tax registration number to be lodged as part of the public officer registration. A tax clearance certificate should be obtained annually after a tax return and assessment have been finalised.

Fidelity insurance: the new legislation requires fidelity insurance for the body corporate’s funds held in Trust. The Trustees should be aware of what fidelity cover is in place, which is also a standard agenda item at the AGM. Trafalgar has R20m fidelity cover (per claim) in place as a standard provision for all managed properties included in the monthly management fee; the professional indemnity and fidelity insurance policy document is available on All bank accounts including investment accounts where body corporate funds are located must be labelled as Trust accounts on the bank statements to be covered by the fidelity cover.

Important resolutions to review and for two Trustees to sign-off at the first Trustee meeting following the AGM:

Levy and interest resolution: necessary to confirm levies are due by the 1st of the month in advance and what interest rate should be charged on arrear levies for the body corporate’s benefit (recommend 15% per annum). Important to note that this resolution will be required for any legal levy collection matters as part of the portfolio of evidence which the judge or magistrate concerned will check.

Handover resolution: authorise the automatic handover of levy accounts after 3 months in arrears. This will assist with prompt and effective handover of levy arrears to a legal collections specialist and will ensure consistent escalation of levy payment defaulters. Trustees will still be notified when levy accounts are handed over to an attorney and the owners concerned will be provided a final pre-summons opportunity to agree an acknowledgement of debt (“AOD”) as part of a soft-collections call made by the attorneys. Monthly debt collection notes will be included in an arrears report with the management reports circulated to all Trustees. Trafalgar has a panel of legal collections specialists recommended for handling the levy arrears collections, and fees have been negotiated down to a party-to-party scale. Legal fee invoices are recovered from the levy accounts concerned.

Recurring payment resolution: a schedule of standard monthly payments to be processed for the body corporate will be prepared for sign-off by two trustees as authorisation for recurring monthly payments to be made. Examples would be municipal charges, payroll, security, garden services and any other contractual monthly or annual services which apply to the body corporate. Approval of recurring payments in this way will greatly simplify the number of ad-hoc payment approvals forwarded to the Trustees.

Recommended Trustee Portfolios and Role Scope:

Depending on size, time and capacity parameters, the portfolios referred to below may be combined or shared as required.

Chairman: the chairman is elected at the first Trustee meeting. The Chairman’s important responsibilities will be to convene and chair Trustee and general meetings, approve quotes and creditor invoices together with the relevant Trustee overseeing the portfolio concerned, and to prepare the annual Trustees Report to present at the AGM.

o Complete a first review of the draft budget for approval by the Trustees at a budget review Trustee meeting ideally in the 10th month of the financial year. Thereafter facilitate the sign-off of a trustee approved budget before the end of the financial year; 2 trustees must sign the approved budget for loading and income statement comparisons.
o Detailed review of the monthly management reports and resolution of any queries with the portfolio manager concerned. An important focus is the effective recovery of utilities from owners based on meter reading-based utility recoveries and review of material budget variances.
o Second signatory for quotes originated by other Trustees for their portfolios
o Second signatory for ad-hoc invoices together with the portfolio Trustee concerned

Important to note that a body corporate with positive cash flow and minimal variances to budget are important objectives for the financial trustee with significant implications and benefits for all residents and owners.

o Facilitation of a 10-year maintenance plan preparation, annual updates and presentation of prior year work completed at the AGM. Close involvement in the execution of annual planned preventative maintenance mapped out in the 10- year maintenance plan ensuring that significant maintenance projects are effectively project managed.
o Facilitation of necessary reactive maintenance identified through regular site-inspections (at least a monthly site inspection recommended) or by a caretaker, body corporate staff, security guards or residents. Reactive maintenance to be attended to promptly with the assistance of a Trafalgar maintenance administrator ideally within 3 – 5 days (urgent reactive maintenance to be resolved within 1 day).
o Scoping of maintenance work required for quoting purposes together with the facilitation of necessary site inspections for sourcing comparable quotes
o Project management (or delegation) for planned preventative maintenance
o Sign-off of maintenance job cards and invoices
o Minimising negative maintenance budget variances is an important objective for the maintenance trustee
o Effective facility management achieved by body corporate staff and / or external service providers

Important to note that consistently clean and well maintained common property across the body corporate has a significant impact on the quality of living for all residents together with property price appreciation for all owners. Trafalgar offers a flexicaretaker service to cover this function if there is limited time and capacity amongst the trustees.

Security: security effectiveness is a critical success factor for all residents and owners considering again quality of living and property price appreciation. The Security trustee should closely monitor and continuously improve security effectiveness, SLA performance of the security service provider and ensure that all security equipment is consistently maintained, regularly tested and fully operational. Continuous improvement for security infrastructure is recommended considering perimeter lighting and boundaries (electric fencing, fences and walls), access control, patrolling and CCTV monitoring, and incident reporting and investigating. Patrolling guards should ideally be monitored by a guardtrack or similar system. The security trustee should also ensure that security costs and maintenance costs for security infrastructure remain within budget expectations and that variances reflected in the management reports are evaluated and addressed.

Gardens: in bodies corporate with gardens serviced by either inhouse gardeners or garden service providers, a Trustee overseeing this portfolio will add value. Regular inspections, management of the gardeners and / or related service providers and making necessary seasonal plans (e.g. composting, planting) will be very important for the best presentation of the gardens. Well- presented gardens and grounds definitely make an important first impression for all residents and visitors, together with a positive impact on property price growth in the building. Overseeing the maintenance of irrigation equipment, garden tools and responsible water use are all important objectives related to this portfolio.

Communication: in medium to large complexes a communication portfolio Trustee is an important role to oversee feedback and communication to all owners and residents. Regular newsletters, notice board advertisements and communication channels all add value to improving engagement and inclusion in the effective management of the body corporate and meeting facility management expectations. A cell phone application such as Estatemate is available to provide direct access to residents to lodge and receive feedback from the relevant role players together with many other features to add value to residents.


Large volumes of circular emails and uncertainties about who can make certain decisions are common challenges amongst boards of Trustees and should be minimised as far as possible. The first Trustee meeting after an AGM is an important opportunity to clarify response time expectations and decision-making scope. The following suggestions are worth noting for a decision to be taken and minuted at the first Trustee meeting, aiming to minimise email correspondence and expedite same day responses from relevant, authorised Trustees:

Ad-hoc invoice approvals: 2 Trustees are required to sign-off ad-hoc invoices. The relevant 2 Trustees should be agreed at the first trustee meeting (e.g. Finance and Maintenance Trustee or Chairman and Finance Trustee) and will be flagged to receive invoices to approve by email from the creditors workflow system. As far as possible ad-hoc invoices for payment will be presented together with signed-off job cards noting that the portfolio Trustee concerned or a caretaker should sign-off the job card confirming that the work has been correctly completed.

The other Trustees would see a full record of all payments in the monthly management reports circulated to all trustees and should not therefore all be copied. All quotes, invoices and signed job cards are securely archived on Trafalgar’s electronic document management system (QDoc). All financial reports are also available online on Trafalgar’s property portal – login details will be provided by your portfolio manager. Only the designated ‘sign-off’ Trustees will be emailed the stakeholders approval emails and invoice details.
Email approval responses (or any queries) should please be provided within 24 hours of receipt to enable the workflow to progress time efficiently for creditors to be paid promptly to achieve best service from the contractors concerned. Delayed payments undermine supplier relationships and effective service delivery.
Quote approvals: achieving time efficient and comparable quotes is best achieved by a written scope of works together with a facilitated site survey with the invited contractors, collectively. Common challenges are inaccurate quotes due to vague scope of work requirements, and incomparable quotes due to contractors making assumptions without the opportunity to clarify questions and scope with an appropriate informed person on site. Five- day turn around objectives are applied to obtaining quotes following a site survey and circulation of a written scope of works. It would be appreciated if email confirmation concerning quote acceptance can be provided by 2 Trustees (Chairman and relevant portfolio Trustee or Finance Trustee and relevant portfolio Trustee) within 5 days of circulating the collated quotes as quotes generally expire within 5 – 7 days.

Quotes being obtained for the 10-year maintenance plan should be flagged as such with the invited contractors, to ensure these are undertaken on the basis of a longer term time horizon and timed conveniently on the contractor’s side.

Minimising email volumes: debating topics and views should be reserved for Trustee meetings which will be a better forum than email, to share ideas and formulate a collective decision. Where a trustee emails an instruction to the portfolio manager concerning their portfolio, the portfolio manager should be addressed directly with other Trustees only copied for information purposes where awareness is very important.

Trafalgar offers a number of resources for Trustees which may be helpful and can be made available on request:
• Microsoft Word (searchable) soft copy of the relevant legislation
• Legislation manuals with keyword indexes
• Popular books covering sectional title management (e.g. Paddocks)
• E-learning training for Trustees
• Email support with a Trafalgar legal specialist (free)

In conclusion, the primary objectives for the board of Trustees should be to oversee prompt and consistent legal and governance compliance, considering the important topics and milestones summarised above. Monthly management reports should be carefully reviewed to check on levy arrears, accurate payments, budget variances and bank balances. Maintenance should be consistent, cost effective and time efficient. Facility management standards for cleaning, security and grounds maintenance should be excellent at all times.

Andrew Schaefer
August 2018

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