By Prof Graham Paddock

Prof Graham PaddockBelow is an example of two of the questions on the discussion forum on Paddocks Club. We want to show what is available to our Community Members!

Remuneration of owner, trustee, employee

Q1. In terms of prescribed management rule 5(b), an employee of the body corporate may be a trustee if he or she is an owner.  If an employee, who is an owner and remunerated by the body corporate as such, is elected as trustee, will it still be necessary for the owners to pass a special resolution in terms of prescribed management rule 10(1)?

Paddocks ClubA1. Yes – in the case you describe, PMR 10(1) will apply to any work this owner does in his or her capacity as a trustee.

It could be argued that in regard to the employment duties that subsist from before the owner became a trustee, no special resolution is necessary. But in practice the person now has a fiduciary duty to supervise their own “employee work” so the two roles become inextricably combined.

A special resolution is necessary to authorise any payment to this “professional owner/trustee”.

Unallocated levy payments

Q2. Our previous managing agent dropped off the planet and a new one was appointed. Given the limited information that was retrieved from the few records that were recovered, our new managing agent, two years later, is still sitting with about R2,000 or so in unallocated levy payments on record with no way of establishing the source of the funds or date of deposit. Further, no one has (or in fact would be able to) come forward and make claim against these payments, given this absence of any paper trail.

We would like to get this “off book” as unallocated levy payments at our next AGM and allocate it to other income, or whatever else, so that we can use this money to meet expenses. The scheme consists of 14 units and no one has even made an attempt to come forward to make any sort of claim against these funds. In addition, units have been bought and sold over this two-year period. Please advise on the correct procedure to move these unallocated levy payments into our normal cash flow. Many thanks.

A2. That is an unusual situation! Assuming the funds were validly levied, we can eliminate as claimants the people who were previously owners.

I suggest that the trustees need to ensure that all current owners know of this situation and are given an opportunity to take it further if they choose to, i.e. prove their claim to the money. And at the same time, tell them that if by the time of the next AGM the body corporate has no evidence that this money stands to the credit of any particular owners, it will be transferred to the general administrative fund without any such allocation.

Article reference: Paddocks Press: Volume 6, Issue 12, Page 5

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