Directions or restrictions on Trustees

We had our AGM and one of the owners requested a restriction to be placed on the Trustees regarding the money that can pay out on projects. Our Chairperson said that we have to vote on this by ordinary resolution. The owner disagreed and said that any owner can place a restriction on the Trustees. How do we deal with this?

The fact that the owners can place restrictions on the Trustees or give them directions is a very important function of the owners.  Trustees must ultimately answer to the owners. 

The Body Corporate in terms of the Sectional Title Schemes Management Act (STSM Act) has certain functions and powers and in terms of Section 7 of the Act these functions and powers are performed by the Trustees:

So, the owners have a right to request a meeting under certain circumstances and must then provide the agenda points they want to be discussed at the meeting and voted on.

But for a normal AGM the agenda is set out by the Trustees and PMR 17(6)

Section 7. (1) The functions and powers of the body corporate must, subject to the provisions of this Act, the rules and any restriction imposed or direction given at a general meeting of the owners of sections, be performed and exercised by the trustees of the body corporate holding office in terms of the rules.

But there are conditions set on the Trustees when performing and exercising these functions and powers:

They can only do it –

  • Subject to the provisions of the Act
  • Subject to the Rules
  • Subject to any restrictions or directions given at a general meeting

If you then look at the Prescribed Management Rules of the Act (PMR) then you see that from the start the owners have this right.  In PMR 16(2)(h) the prescribed agenda of the very first general meeting (the Inaugural meeting) this is already included:

PMR 16(2)        The agenda for the first general meeting of members must include at least the following —

(h)   a motion detailing any restrictions to be imposed or directions to be given in terms of section 7(1) of the Act or confirming that there are no such restrictions or directions.

PMR 17(6) that deals with the prescribed agenda of any general meeting also includes this power

PMR 17(6)        The order of business at general meetings is as follows:

(m) give directions or impose restrictions referred to in section 7(1) of the Act; and –

Nowhere in the Act does it state that such directions or restrictions should be voted on by the owners.

Some attorneys say that it must be an ordinary resolution, but there is no reference to this in the Act.

So basically any owner can stand up at a general meeting and place any restriction on the Trustees or give them a direction.

The problem with that is that it can be very difficult to stick to the directions and restrictions if they are not carefully worded.

If an owner states that the Trustees should not pay more than R10 000 out of the BC funds without consulting the owners and the monthly Security account is R15 000 then you have a problem. 

Also it must be clearly worded in terms of what the Trustees need to do when they want to exceed the R10 000 restriction – must they call a general meeting? Do they need a specific resolution by the owners (ordinary/special/unanimous).

When an owner at a general meeting stands up to place a direction or restriction on the Trustees the Trustees must debate this with the owner – to be clear what he/she wants and to be clear on how it is worded so as to be enforceable.

Also directions and restrictions runs from one general meeting to another – they do not continue indefinitely.  So if you want to keep one in place you need to repeat it and minute it at the next general meeting.