AGM, foundation of a sectional title scheme's success

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The most effective format of achieving this partnership is an annual general meeting (AGM), traditionally conducted following the close of a financial year and essentially forms the foundation of a scheme’s success.

An AGM is also required by law, as stated in South Africa’s Sectional Titles Act. “The purpose of an AGM is to discuss the way forward for the new year and, therefore, it is extremely important that the meeting in held within the first four months following the close of the financial year. Typically the financial year for a sectional title scheme runs from 1 March each year until the last day of February in the following year. This means that an AGM needs to be held by no later than the end of June during that same year.”

Attend AGM

Smit further explains that it is imperative for owners of a sectional title unit, as well as body corporate members, to attend the AGM that is held by the scheme. Key issues, which determine the way forward during the year, as well as who is responsible for managing the process, are discussed and decided on at this meeting.

“Before the AGM can commence a notice of the meeting needs to be sent out to all owners, trustees and body corporate members 14 days before the meeting is scheduled to take place. If there is a unanimous or special item that needs to be addressed at the meeting, the notice period is increased to 30 days. The notice of the AGM must include information detailing the date, time and venue, as well as the agenda, insurance schedule, yearly budget, audited financial statement and annual report.”

Smit states that the agenda for an AGM is prescribed in the Management Rules of the Sectional Titles Act and therefore the trustees are bound to deal with all the agenda issues at the meeting.

“The most important items that need to be addressed are the adoption of the new budget, which is either compiled by the trustees or the designated property management company, the election of trustees, approval of the sum insured and any restrictions placed on newly elected trustees. It is also the responsibility of the trustees, or the managing agents, to present the annual report and any other financial statements.”

Duty of trustees

The responsibilities for actions to be taken are shared between the trustees and managing agents, in the event that the trustees have hired a property management company, and the body corporate. Furthermore, he says that following the AGM, it is the duty of the trustees elected to perform the functions outlined in the Sectional Titles Act and its prescribed rules. These duties include ensuring the body corporate has sufficient income to cover its monthly expenses, to maintain the common property and provide for future maintenance.

“The body corporate is responsible for ensuring that the trustees perform these functions consistently and do not act outside the law. The Trustees are required to meet as soon as possible after the AGM as they need to elect a chairperson and confirm to the owners, within 14 days of the AGM, how the levies for the financial year will be recovered from them.

"The trustees also determine how often owners should receive feedback regarding issues raised at the AGM. However, thereafter it will depend on the type of issues they are dealing as to whether follow-up meetings needs to be held,” concludes Smit.