Home Owners’ Associations: what are they and what do they do?
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Home Owners’ Associations (HOA) are amongst the fastest growing sectors in the property market today. It is important to note the difference between a Home Owner’ Association and a Body Corporate.
Where a Body Corporate is found in the case of sectional title property schemes, a Home Owners’ Association is an association that represents the interests of a body of multiple owners in full title or freehold housing schemes, generally a gated community, but this can also be a community of homeowners in a street or suburb for example.
While a Home Owners’ Association fulfils the same function as a Body Corporate, it is not governed by the Sectional Title legislation. Each property owner becomes an automatic member of the Home Owners’ Association upon acquisition of a property that falls in the estate or area governed by the HOA.
In a gated estate, the common parts of the estate is usually owned by the HOA. This body then manages the estate or area on behalf of home owners and there will be rules that govern property and conduct within the estate or area.
The objective of the HOA is to look after the infrastructure, but is also increasingly concerned with the security of the estate or area. There is generally a fee payable and from time to time, the HOA may introduce special fees to cover certain maintenance or infrastructure upgrades.
It is important for prospective buyers to look into the relevant Home Owners’ Association and especially in the case of special rules that can extend to the appearance of property including the colour paint that is permitted and even whether pets are allowed.
There are two types of legal structure that are used to create or establish an HOA, namely (1) a non-profit company or (2) a common law association.
In the case of a non-profit company, the main governance documentation will be the memorandum of incorporation (MOI) which is governed by the Companies Act 71 of 2008. The content of the MOI cannot contradict any provision in the Companies Act. In the case of a common law association, the main governance documentation will be a written constitution and the common law also has detailed rules that apply to these associations.
The purpose of the documentation is to detail the purpose and regulate the rights and responsibilities of the HOA including the executives and the members. In both instances, these contracts bind every member of the Home Owners’ Association.
In the case of a gated estate, title deed conditions generally impose the obligation to be a member of the HOA and to comply with its governance documents. No registration of any transfer can take place without a clearance certificate from the HOA that confirms that all amounts due to the HOA by the person transferring the property has been paid. The constitution and MOI will also require that any sale agreement must include a reference to these obligations.
(Source: www.paddocks.co.za)