Fiduciary Duties of Scheme Executives
Ownership, Legal Framework & Your Responsibilities as a Trustee or Director
Serving as a trustee (sectional title) or director (HOA) is more than volunteering your time — it’s accepting a legal and governance responsibility that affects every owner’s property investment. This article explains what fiduciary duty means in practice, which laws apply to different scheme types, and the foundational duties scheme executives must understand to govern responsibly.
Why fiduciary duty matters in community schemes
A home is often someone’s biggest investment. In a community scheme, trustees and directors influence:
- the financial health of the scheme
- the upkeep of shared property
- rule enforcement and resident conduct
- long-term value and risk management
That’s why scheme executives are expected to act with a duty of care — meaning they must act with diligence, skill, competence and good judgment and consistently work in the best interest of the scheme and its members.
In practice, duty of care looks like:
- staying informed about scheme affairs
- attending meetings and participating in decisions
- understanding budgets, risks and compliance requirements
- seeking expert advice where needed (insurance, legal, compliance, technical)
Even if you disagree with a board decision, if you were informed and the board acted, it still impacts you — which is why meeting attendance and good governance records are critical.
Which laws apply to your scheme type?
One of the most common governance mistakes is applying the wrong framework to the wrong scheme. The webinar highlighted that trustees/directors must first understand what type of scheme they are governing.
Sectional Title Schemes are governed by:
- Sectional Titles Schemes Management Act (STSMA)
- Management Rules (Annexure 1)
- Conduct Rules (Annexure 2 + scheme-specific rules)
- CSOS Act (dispute resolution + governance oversight)
Homeowners Associations (HOAs) are generally governed by:
- CSOS Act
- MOI (Memorandum of Incorporation) and the Companies Act
(Some HOAs still rely on outdated “Articles of Association” — these typically need updating.) - Architectural guidelines / aesthetics policies (strongly recommended)
Other community schemes may include:
- Retirement schemes (often governed by housing development rules for retired persons, life right agreements, or scheme rules)
- Voluntary associations (often governed by common law + constitution, e.g., smaller gated communities)
Key point: your authority, enforcement, and decision-making processes depend on the governing framework that applies to your scheme.
How trustees/directors are appointed, and why it matters
Trustees/directors are usually elected at an AGM or SGM. Good governance begins at the election stage.
Common process principles:
- Nomination forms are circulated with the meeting notice
- nominations are ideally received in writing before the meeting (the webinar referenced advance submission to allow for orderly elections)
- if the required number of trustees/directors is not met through written nominations, additional nominations may be taken from the floor
Best practice (recommended in the webinar):
Allow new nominees a short introduction during the meeting (background, skills, why they want to serve). This helps owners understand who they are electing and strengthens transparency.
What trustees and directors are responsible for
Once elected, scheme executives carry core responsibilities that cannot be outsourced — even where a managing agent assists.
Trustees/directors are responsible to:
- control, manage and administer the scheme (including common property)
- ensure compliance with the Act and rules
- enforce rules fairly and consistently
- manage financial oversight and approve budgets
- ensure governance meetings are held timeously
- act honestly and in good faith, not for personal gain
- ensure the scheme is adequately insured and properly valued
The webinar strongly emphasised record keeping: minutes, budgets, audited financials, resolutions and correspondence are essential governance evidence.
Why meeting attendance is part of your duty of care
The webinar highlighted a practical reality: even if trustees/directors are unpaid volunteers, scheme decisions still carry consequences. If you were informed and a decision was taken, it affects the scheme and your role.
Good governance requires active participation, not passive membership.
Owner membership and owner responsibilities still matter
A common misunderstanding is that “trustees run the scheme” and owners are separate from governance. The webinar emphasised:
- every owner is automatically a member of the scheme
- owner compliance with conduct rules is essential
- alterations and changes must comply with scheme rules and processes (especially where they affect common property, noise, rubble, or structural impact)
Conflict of interest: the non-negotiable governance rule
Conflict of interest must be disclosed, and trustees/directors must recuse themselves from affected decisions.
A practical example raised:
- recommending a close relative’s company for a scheme contract without disclosure creates a conflict
- correct governance requires transparency, an objective process, and stepping out of the decision
In Part 2, we focus on:
- decision-making and documentation (round-robin resolutions, electronic meetings, written resolutions)
- budgets, levies, audits and oversight of service providers
- insurance best practice and valuations
- CSOS compliance and dispute resolution reality checks
- how owners can protect their rights and enforce accountability