17 Dec How to plan for your body corporate in 2020
Each new year presents its own challenges for a body corporate. Body corporate planning allows unresolved matters from the previous year to be attended to and for all the role players to reset for the year ahead.
What pro-active planning can be done?
Every year body corporate trustees must ensure that they deal with legislative requirements that make their scheme compliant.
The trustees, in conjunction with their managing agent, can plan for these requirements by prioritising it by importance and timing. The following items must be reviewed every year and can be planned for:
1. Dates and times of trustee meetings
This ensures that trustees are aware of the meetings well in advance and allows for better attendance. It avoids unforeseen or untimely meetings.
2. Provisional date for the AGM (within four months after the financial year end)
Having a provisional date in mind gives all relevant parties the opportunity to deal with their responsibilities to make sure the meeting takes place on the date agreed upon.
3. Provisional budget of income and expenditure
Preparing a provisional budget before the year end provides the trustees with a better understanding of the scheme’s financial position as well as how it will impact the new levies.
4. Levy increase (at start of new financial year)
If the trustees have a provisional budget prepared, they can accurately increase the levies at the start of the financial year. By doing so they reduce the financial impact of a back-dated levy increase.
5. Renewal of the scheme’s insurance policy for replacement values
This provides the trustees an opportunity to request comparative insurance quotations and to accurately budget for this expense.
6. Review and update of the 10-year maintenance plan
The 10-year maintenance plan must be presented at the AGM. In conjunction with the budget and financial planning, the maintenance plan can be adjusted to reflect the intention of the trustees to address urgent capital maintenance issues.
7. Valuation for insurance replacement purposes (every three years)
Depending on when last a valuation was done, this important responsibility assists trustees to accurately renew the scheme’s insurance policy based on current replacement values.
Why is pro-active planning important?
The management of a sectional title scheme requires teamwork between the trustees themselves, as well as between the trustees and their managing agent as they all play important roles.
Ultimately, the trustees are responsible for the management of a scheme. The fiduciary responsibilities of the trustees, and the importance of their duties serving the other members, require that planning is prioritised.
This way all parties concerned are aware of their responsibilities and the timing that needs to be adhered to.
Conclusion
Like any company, a body corporate can find itself in financial and regulatory trouble if trustees do not understand their duties properly, act on these in a timely manner and within the requirements of the various Acts.
Responsible trustees will ensure they plan for every aspect of the scheme’s management. Not doing so may indicate that the trustees are not fulfilling their duties which can lead to a dysfunctional and inefficient body corporate. This can have a financially detrimental impact on the members of the scheme. As a body corporate member, you are entitled (and responsible!) to hold your trustees accountable for the duties they accepted by being appointed as trustees.