A reader who lives in a sectional title complex wants to know if he has a right to peruse the body corporate‘s anticipated annual expenditure, as well as the financial statements.
He is an owner in the complex and pays levies to the sectional title scheme.
Unless the reader is new to the complex and has not attended any annual general meetings, he should be aware of the financial position of the complex.
It is, however, quite possible that the complex has been mismanaged or is not actively managed at all and that the legislation is not adhered to.
The applicable legislation in this instance is extensive and detailed.
See the reader’s question here.
Under the Sectional Titles Management Act, the trustees of the body corporate have several important duties relating to the fiscal well-being of the complex.
Certain sections of the act provide for the establishing of an administrative fund for repairs and maintenance of the common property, the municipal expenses of the complex and insurance premiums.
Similarly, these sections cover the establishment of a separate reserve fund to cater for the cost of future maintenance and repair of common property.
The owners in the complex are required to contribute to these funds through the levies, as determined by their respective participation quotas.
It should be noted that additional contributions to these funds may also be required from time to time.
The budgets for these funds are approved at the body corporate’s annual general meeting and the financial statements of the previous financial year are considered at the same time.
The plan applicable to the use of the reserve fund is put to the owners for approval.
Certain conditions may be prescribed for the payment of money from the reserve fund and any such use should be reported at the next annual general meeting.
The trustees are obliged to ensure that proper financial records are kept, including all income and expenditure.
Of possible greater interest to the reader is the section covering management rules.
These rules state that the financial books must contain all information necessary to allow members to assess the body corporate’s financial situation, as well as their financial position with regard to the body corporate.
The financial statements must be audited by an independent auditor to ensure that no theft or fraud has taken place and that the financial affairs of the body corporate have been managed effectively.
Another section in the management rules allows the reader access to any financial records he desires.
Any owner in the scheme can apply to the body corporate for the inspection and copying of all or any of the books of account and records.
There is also a rule which governs the right to examine earlier books of account.
The body corporate must ensure that all its books of account and financial records are retained for six years after completion of the transactions, acts or operations to which they relate.
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