Whilst the prerequisite for the levy fund is set out crisply in the Sectional Titles Schemes Management Act 8 of 2011, you will not find the same clear legislation applicable for a Homeowners’ Association which runs an estate / cluster development.  There are approximately 3000 Homeowners’ Association schemes across the country, incorporating close to 530 000 freehold homes.  That’s a huge figure.  What’s more, these schemes can contain large tracts of land in the form of rambling golf or equestrian estates.  It costs a substantial amount of money to operate them, so how do owners ensure that their estates operate optimally, covering expenses, keeping money aside and continually improving asset value?

Importance of the MOI

The essential function of a Homeowners’ Association (HOA) is to create an MOI (Memorandum of Incorporation) or Constitution which includes in the MOI or attached set of rules, policies, procedures and directives to manage an estate.  Of paramount importance within that document is the reference to payment of monthly levies and the condition that should an owner wish to sell his home, no clearance certificate will be issued by the Homeowners’ Association unless all levies and monies due to the association are paid in full.

Directors of the association must always be alive to the indubitable importance of that MOI.  That document must be tailor-made for the estate, containing clauses which could be the selfsame as those found in sectional title rules.  Directors can carefully craft their rules, setting out exactly how levies work, how they are increased at annual general meetings, what resolution is required, and also what they include.

To reiterate, you will not find the “running of the property” detail in the legislation.  The Companies Act of 2008 regulates the association in general terms.  Directors need to outline the “running of the property” detail in the MOI.  Due to the fact that the documents are lodged with the Registrar of Companies, owners are legally bound.  In addition, the title deed of each property should contain a clause which legally links the owner to being bound by the Homeowners’ Association.

HOAs may have different procedures

Every HOA may have a different procedure for raising levies and agreeing on increases.  You’ll find these procedures in the MOI or attached to the MOI rules.  The levies must be raised to fund the common expenses in the estate, such as parks, roads, guardhouses and lighting.  Levies will additionally cover common property and public liability insurance, security, waste management, office administration, staff costs and rates and taxes related to common property.

Anyone interested in buying into a development run by a HOA should have sight of the MOI and rules.  Estate Agents selling in Estates will have a copy available if they are worth their salt.

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