The Unsung Heroes: Understanding the Risks of Being a Trustee

Being a trustee of a Sectional Title Scheme, or Common Law NPC is a position of immense responsibility. You are entrusted with safeguarding the assets and interests of others. While it's a noble and rewarding role, it's important to understand the significant risks involved.

1. Financial Liabilities: Trustees are personally liable for any financial losses incurred by the BC or company due to negligence, breach of duty, or misconduct. This means you could be held responsible for paying back lost funds with your own money.

2. Legal Challenges: Trustees can face lawsuits from beneficiaries, creditors, or even the government. This can stem from issues like mismanagement of funds, conflicts of interest, or even improper investment decisions.

3. Time Commitment: Trusteeship requires a significant time commitment. You need to attend meetings, manage assets, keep accurate records, and stay informed about the Scheme's affairs. This responsibility can be demanding, especially if you have other commitments.

4. Potential Conflicts of Interest: There are inherent risks of conflict of interest, especially if you are a beneficiary of the Scheme's. You need to be transparent about your financial and personal connections to the Scheme's and act in the best interests of all members.

5. Regulatory Scrutiny:  Failure to comply with regulations could lead to civil and even criminal litigation.

Mitigating the Risks:

While these risks are real, they are not insurmountable. By taking proactive steps, you can minimize your exposure:

• Seek Professional Advice: Consult with your Managing Agent, or an attorney and financial advisor specializing in Community Schemes. They can provide guidance on your duties, obligations, and potential legal risks.

• Understand Your Responsibilities: Thoroughly review the scheme’s governing documents and familiarize yourself with your duties as a trustee. This will help you avoid mistakes and ensure you are acting within the bounds of the law.

• Maintain Proper Records:  Ensure that accurate and detailed records of all scheme transactions, including investments, expenses, and communications are kept. This documentation can be vital in defending yourself against allegations of wrongdoing.

• Stay Informed: Keep abreast of changes in legislation to ensure you are adhering to the latest legal requirements.

Being a trustee is an honorable responsibility, but it comes with significant risks. By understanding these risks and taking appropriate steps to mitigate them, you can fulfill your duties effectively while protecting yourself from potential liabilities. Remember, seeking expert advice and acting with integrity are crucial components of responsible trusteeship.