The trustees of sectional title schemes are often at this time of year preparing for their annual general meetings, at which they come face to face with body corporate members.
“Most sectional title schemes’ financial years end on February 28,” says Michael Bauer, general manager of IHFM, a sectional title management firm.
“Trustees are by law required to get their auditors to finalise their schemes’ audited financial statements four months after the end of the year. They are then required to follow up with an AGM at which the body corporate members have the opportunity to review key issues with the trustees and their managing agent.
“The AGM has to take place within four months of the financial year end. The prescribed management rules also stipulate that notice of the AGM has to be given at least 14 days before the date and that this notice must contain all supporting documents for the AGM. This gives members the chance to consider these in detail before the meeting and ensures transparency and a more productive meeting.”
Bauer says the financial statement and auditor’s report have to be discussed at every AGM. Also, the following items need to be approved, with or without amendment:
a. the schedule of replacement values,
b. the estimate of income and expenditure,
c. the appointment of an auditor or accounting officer,
d. the determination of the number of trustees to run the scheme for the following year,
e. the election of these trustees,
f. any special business of which notice has been given,
g. the directions and restrictions by which the trustees will have to operate in the year ahead,
h. the determining of the address from which the body corporate will operate,
i. confirmation by the auditor or the accounting officer that any amendment of the rules has been submitted to the deeds office.
“In any sectional title scheme there will be a tendency for body corporate members not to attend the AGM, but this can be disastrous. If it is genuinely difficult for owners to attend the AGM, they should appoint a proxy to attend and vote on their behalf. Where no proxy is available it is acceptable for an owner to delegate his vote to the chairman. It is also acceptable for the chairman or a member to canvass members’ votes by means of proxies and many important decisions have been passed at AGMs in this way.
“Non-attendance by members or their proxies can lead to serious consequences, especially if the required quorum of members is not achieved at the first meeting. In these circumstances the trustees are obliged to adjourn another meeting within seven days, at the same time and the same place. At this meeting the quorum requirements will no longer apply.”
Bauer says it can happen that, without the actual consent of the body corporate members, a handful of members and/or trustees pass a resolution for a significant alteration to the scheme, the raising of a loan or other measures which will require big increases in annual levies, or could affect the financial stability of the body corporate. It is also quite possible under these conditions that substantial sums already paid out will go unquestioned.
“Frequently, owners with grievances will try to use the AGM as a forum for airing their problems, for instance that the managing agent did not do this or that or that the resident in unit x still plays loud music at midnight. The trustees and managing agent must resist these attempts to divert discussion from the prescribed agenda. If they do not, more important matters will be overlooked and disastrous or meaningless AGMs will simply ensure that fewer members attend the following AGM.”
He advises trustees to deal with individual complaints in trustee meetings or on a one-on-one basis.
Visit www.ihfm.co.za and subscribe to the free weekly online newsletter or call Michael Bauer on 083 255 4442.
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