Trustees face liability as mismanagement puts sectional title owners at risk

WHEN trustees of sectional title schemes neglect their duties, mismanage funds, or fail to enforce rules, the consequences can be severe, not only for the trustees themselves but also for property values and owners left footing the bill.

- NICOLA MAWSON

Experts warn that trustees face personal liability if they don’t act in the best interests of a sectional title scheme, yet owners are not without legal recourse.

They also note that managing agents are no substitute for responsible leadership and trustees cannot abdicate their responsibilities.

Wouter van den Heever, director at ASI Property, warns that “trustees may be held personally liable for losses suffered by the body corporate or owners where they have acted negligently, dishonestly, in breach of their fiduciary duties, or outside their powers”.

He notes, however, that trustees are indemnified for good-faith decisions made within their authority.

Owners are not powerless, says Ron van der Bos, MD of Stonewood Property Management.

They can call a special general meeting if owners holding 25% of common property are present, giving them the ability to remove trustees much as they would at an annual general meeting. This 25% is known as participation quota and relies on a calculation of the square meterage of their ownership based on several factors.

Trustees who fail in their duties can be removed through resignation, court order, or by the Community Schemes Ombud Service (CSOS), created under the Community Schemes Ombud Service Act, explains Van den Heever.

Other reasons for trustees being removed from office include misconduct, failure to perform duties, or incapacity, he says.