Below are examples of two questions that we recently received from community members on the Paddocks Club discussion forum.

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Can trustees decline an owner’s extension?

Member’s question:

I have a Body Corporate where an owner is wanting to extend their section by 22sqm. They have drawn plans and presented them to the trustees. The trustees however will not approve the extension. I advised that it should be presented at the AGM for owners to vote. They have advised that they do not feel the need as trustees can decline.I am concerned that the dismissal is unfair – can you please point me in the direction of the STSMA to advise the trustees or advise if they are correct?
Much appreciated.

Jennifer’s answer:

The two provisions that you need to look at are section 24 of the ST Act and section 5(1)(h) of the STSM Act.
Section 5(1)(h) STSM Act provides that if the Body Corporate authorises a section extension application by special resolution, the Body Corporate must approve the section extension. In this case, the trustees are not entitled to decline the section extension application without taking it to the body corporate to vote on by special resolution. And if the body corporate does approve the section extension application by special resolution, the trustees will not be able to reject it.For more information please see Graham’s writing on section extensions in the Sectional Title Survival Manual.

 

Can we re-allocate reserve funds from the approved budget?

Member’s question:

When our Reserve Fund budget was approved at our AGM in October 2022, we had allocated R174 000 for one line item, based on a quote we had received in 2020. However, we now find that the work is going to cost R279 220. We have the option of postponing the work, or of allocating the amounts budgeted to other line items (which are not urgent) to this work. The total Reserve Fund budget for this financial year is R342 332. The trustees would like to proceed with the work as it is the most pressing item on our maintenance list.
What process do we need to follow? Do we email the owners and see whether the majority would support revising the Reserve Fund budget before the end of the financial year and before the next AGM, to enable us to proceed with this large project? Or do we have to call a SGM?

 

Jennifer’s answer:

PMR 9(c) places a positive obligation on the trustees to “apply the body corporate’s funds in accordance with budgets approved by members in general meeting”. So, generally, the trustees are not entitled to deviate from the approved reserve fund budget. However, PMR 24(5)(b) may provide a solution as it allows the trustees to deviate from the approved reserve fund budget if the trustees resolve that such payment is necessary for the purpose of an urgent maintenance, repair or replacement expense (see the categories listed in PMR 24(5)(b)(i)-(iv) for more info).

If the expense can be justified by the trustees as urgent maintenance/repair/replacement, they can resolve to spend the money from the reserve fund despite it being a deviation from the approved budget. However, if they do this, they must ensure that the amount spent does not exceed the amount necessary for the purpose for which it is expended, it must not exceed any limitation imposed by the body corporate on expenditure or be contrary to any other direction/restriction [PMR 24(6)], and the trustees must report to the owners on any such expenditure asap after it is made [PMR 24(5)(iv)].

I hope that helps.

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Article reference: Paddocks Press: Volume 18, Issue 5. This article is published under the Creative Commons Attribution license.

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