Education and risk in community schemes

(Updated 17 February 2025)

It is fair to say that the lack of skills and knowledge on the part of many trustees, to make well-informed decisions is a huge risk to schemes. Over the years we have seen many poor decisions being made resulting in substantial losses for schemes. Many of these losses, caused by trustee error and omissions land up as disputes, rejected insurance claims, or in the case of trustee indemnity claims, affecting the claims ratio.

Here are 30 common errors or omissions:

1. Failing to prepare a proper budget which leads to special levies or cash flow issues.
2. Under-insuring or over-insuring the buildings by ignoring the replacement value rules and being unaware of the insurance obligations
3. Not collecting arrear levies and allowing financial shortfalls and over burdening the paying owners.
4. Failing to keep proper financial records – Risking compliance issues and mismanagement.
5. Improper use of funds – Using reserve funds for operational expenses without proper approval.
6. Not conducting a reserve fund study – Leading to inadequate long-term maintenance planning.
7. Misinterpreting the Sectional Titles Schemes Management Act (STSMA) – Making decisions that contradict the law.
8. Failing to enforce the conduct rules consistently – Leads to disputes and loss of control.
9. Not following proper procedures for trustee meetings – Making decisions without valid resolutions.
10. Neglecting AGM requirements – Failing to call AGMs or improperly distributing notices and minutes.
11. Not understanding the powers and duties of trustees – Exceeding authority or failing in responsibilities.
12. Failing to comply with POPIA (Protection of Personal Information Act) – Mishandling owner data.
13. Not understanding insurance coverage – Excluding, inadequately or underinsuring important risks like public liability or fidelity cover.
14. Delaying claims or not reporting them properly – Leading to claim rejections or delays in repairs.
15. Allowing owners to under-insure additional items – Creating financial exposure for the scheme. For example, solar panels, swimming pools etc.
16. Ignoring liability risks – Failing to address safety hazards in common areas. Swimming pool gate closing mechanisms, loose bricks and paving, windowpanes etc. are often neglected which could even cause the rejection of liability claims, in severe circumstances.
17. Failing to maintain common property – Leading to deterioration, claim rejections and increased costs later. Waterproofing failure due to lack of maintenance is a common oversight.
18. Not keeping up with long-term maintenance plans – Ignoring the 10-year maintenance plan requirement.
19. Mismanaging maintenance projects – Hiring unqualified contractors, doing a low-spec fix or bypassing quotes.
20. Ignoring waterproofing and roof maintenance – Leading to leaks and structural damage.
21. Not inspecting common property regularly such as boundary walls or retaining structures – Overlooking potential liabilities.
22. Not communicating effectively with owners – Creating conflict and dissatisfaction.
23. Making decisions without consulting owners – Acting without proper voting or input.
24. Failing to document decisions – Causing disputes over trustee actions.
25. Ignoring disputes between owners – Allowing minor issues to escalate into legal battles.
26. Neglecting security risks – Not maintaining or upgrading access control or CCTV when necessary.
27. Unlawfully restricting owner/tenant access – Violating property rights without proper procedures.
28. Allowing personal interests to interfere with decisions – Favouring friends or personal investments.
29. Failing to declare conflicts of interest – Engaging in deals that benefit trustees unfairly.
30. Failing to appoint or consult professionals when needed – Trying to handle legal, financial, or technical matters without expert advice, leads to costly mistakes.

CSOS regulations

CSOS Regulation 14 states that, among other duties, it is a duty of a scheme executive (trustee) to:

(a) take reasonable steps to inform and educate himself or herself about the community scheme, its affairs and activities as well as the legislation and governance documentation in terms of which the community scheme operates.

(b) take reasonable steps to obtain sufficient information and advice about all matters to be decided by the scheme executives to enable him or her to make conscientious and informed decisions;.

Community scheme insurance and financial planning are important areas of management and trusteeship that deserves special attention. Decisions need to be taken about insurance and risks covering community assets worth hundreds of millions of rands.

Trustees usually do not have the time to invest hours in becoming community scheme experts but should at least upskill themselves enough so they can confidently make informed decisions.

What should trustees do to better equip themselves?

There is plenty of information available these days, information overload one could argue.

In our community scheme ecosystem, there are some excellent resources.

Here are some suggestions:

• Attend events such as sectional title webinars, physical events such as those hosted by the National Association of Managing Agents( NAMA) the Let’s Get Physical (LGP) group of professionals, Women in Sectional Title (WIST) and other local community scheme organisations.
• Subscribe to YouTube channels such as Addsure’s YouTube channel, Stratafin’s channel, TVDM, 0861WaterLite and others. By subscribing, one keeps up to date with the latest uploads.
• Join interest groups such as Sectional Title Living (Facebook group), Portfolio Managers Support (Facebook group), Addsure face Group and many others.
• Purchase a few reference books such as Paddocks’ Sectional Title Survival Manual, Paddocks Sectional Titles Meeting Handbook, Marina Constas’ and Karen Bleijs’ Demystifying Sectional Title and others.
• Obtain hard copies or download pdf copies of helpful explainer booklets such as Addsure’s Sectional Title Insurance Guide, My Home Insurance, My Geyser Claim, etc.
• Visit reputable websites for quality and trustworthy articles and information such as Paddocks Press, Stratafin, TVDM, Addsure and many managing agent websites. If one subscribes to these, one receives notifications when new articles are published.
• Join discussion forums such as Paddocks Club and Your Neighbourhood.
• Do online courses. Trustees can do the free Stratafin trustee course, authored by Dr Carryn Durham, renowned courses offered by Paddocks Learning, and the NAMA Nuts and Bolts course.

A list of these and other resources can be found via the blue learning resources button link below.

In an ever-evolving regulatory and risk environment, trustees should recognise that education is not just a recommendation, it is a necessity. A well-informed trustee body is essential for the financial health, legal compliance, and long-term sustainability of any community scheme. By taking advantage of the many resources available, engaging with professionals, and continuously upskilling, trustees can confidently navigate their responsibilities, mitigate risks, and ultimately contribute to a thriving and well-managed scheme.