A reader has asked the experts for a comparison between property ownership where the provisions of the legislation relating to sectional titles are applicable and where those of a homeowners’ association (HOA) apply.
See the reader’s question here.
An HOA is typically found in so-called cluster housing.
This is when a development is done on a piece of land with a shared, privately owned open space for amenities. Each owner obtains a separate title deed for his or her piece of land and there is a joint right of use of the infrastructure and common facilities.
The ownership of such facilities vests in the HOA.
Often, the HOA is operated in the form of a non-profit company and an elected executive committee is responsible for its day-to-day running.
The general meeting of owners elects the members to that committee and makes decisions by means of resolutions taken at general meetings.
The association’s constitution sets out the guidelines for the management, operation and maintenance of the common property. This usually includes landscaping, recreation facilities, private streets and driveways, outdoor lighting, and communal structures and fences.
This constitution will also set out the way in which any part thereof may be amended, usually at a special general meeting or at the annual general meeting.
The concept ‘sectional title‘ on the other hand describes the separate ownership of units or sections within a complex or development.
When you buy into a sectional title complex, you purchase a section or sections together with an undivided share of the common property, which is known as a unit.
A sectional title unit may refer to anything from a semi-detached house to a townhouse, flat, apartment or duet house.
What is clear from both forms of ownership is that there will be some form of co-management of parts of the property, typically in the form of “common areas”.
This means that joint decisions need to be made from time to time.
Furthermore, especially in a sectional title complex, restrictions may be in place regarding the outside appearance of your property and potential owners need to ensure that they will be able to abide by such rules.
The administration of a sectional title complex is highly regulated and the applicable law is well developed and extensive.
An HOA operating as a company will function under the applicable company and other laws.
The payment of levies is also often contentious in both forms of ownership.
Once a decision has been made by the relevant committee or body corporate, all owners will be bound by it.
However, sufficient allowance is made for electing the body in charge of the property and general meetings where decisions are made and so forth.
It is simply up to owners to participate in the decision-making process as much as they can to ensure that their interests are properly represented.
Both systems, as with most things, are subject to potential abuse. It is thus necessary for suitable people to bear office and for appropriate checks and balances to be implemented.
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Arnoldus says
The government announced that:
A dispute resolution system which would operate not only for sectional title schemes but also for share block schemes, retirement developments and homeowners associations (‘community schemes’) will be implemented.
The Department of Land Affairs announced that
Community Schemes Ombud Service Act would provide Education, to prevent disputes which arise due to a lack of understanding of the fundamental principles which apply in each form of community scheme, must be provided freely.
The Department of Land Affairs controls both the registration of deeds and the survey of land. Thus the Chief Registrar of Deeds and the Chief Surveyor-General are officials within that Department. The Department is well able to deal with all the technical aspects of sectional titles, particularly the approval of sectional plans and the registration and transfer of rights in sectional property, but it does not have the facility to add any value to the management of sectional title schemes. The role of the Department of Land Affairs in the management of sectional title schemes is limited to being the custodian of the governance documentation, including the management and conduct rules of schemes. But, as an increasing percentage of homes in South Africa are held under sectional title, there is an increasing need for government to provide some form of support to persons who own sectional title units, particularly in the area of dispute resolution.
A dispute resolution system which would operate not only for sectional title schemes but also for share block schemes, retirement developments and homeowners associations (‘community schemes’) will be implemented.
With approximately 530 000 home owners’ association (HOA) units throughout South Africa, compared to 780 000 sectional title units, advice for HOAs is a good opportunity for attorneys who specialize in Property Law. Sectional title schemes are created and managed under the national Sectional Titles Act, 1986. However, Home Owners’ Associations in South Africa are not governed by any national legislation. They are either established as non-profit companies or as common law associations, created to manage particular communities, often “gated” and operated separately from the surrounding properties. Some of these need attention.
§ The legal, financial, physical and administrative aspects of home owners’ association (HOA) management
§ HOAs established as non-profit companies and common law associations
1. Basic principles of HOAs
2. Design and formation of an HOA
3. Governance documentation
4. Members, their meetings and decisions
5. Executive committee members, their meetings and decisions
6. Finances, accounting, disclosure and auditor
7. HOA administration
8. Remedies -to combat self enrichment of directors
– to stop directors “renting” common property at ridiculously low rent, and then letting it to others at a 1000% (five thousand percent) profit
– to criminally charge directors who decide on low levies for themselves and then increase the levies by 260% for the home owners
– to stop directors “inviting hundreds” of people into the HOA NPC property for their personal money making schemes.
We are a group looking for answers. This is a long term dream – but there are NO books on HOA NPC in SA. Paddocks published a book on HOA in general 3 years ago, but the HOA NPC with company law, ombud, King 3 need to be covered in detail.
Sectional Title (townhouses and flats) are strictly regulated in South Africa. The new Community Ombud Act has been created to protect owners in nin-profit HOME OWNERS association HOA NPC.
However there are numerous non profit Home Owners Associations HOA NPC which controls walled estates / gated communities / sea side resorts and golf estates. It would be of interest if you read the new law and interpret.