Estates usually have own rules
Buyers should fully understand their responsibilities before signing a sale agreement in an estate. Here a developer establishes a home owners' association (HOA) to protect the value of the privately and commonly used property.
As there is no specific Act governing group housing schemes, each is principally governed by its own constitution.
HOA constitutions differ vastly to the extent that different practices have developed in the various provinces.
The developer is key to establishing the contents of a sound constitution that owners will be able to amend only with considerable difficulty.
Initially, while the developer protects his interests, he must also ensure that, at the end of the development period, owners are left with a well-planned development and an efficient and functional HOA.
In spite of the divergence in the style, content and adequacy of different HOAs there are some essential aspects that should be in all constitutions.
These include its legal status, objectives, membership, administrative structure, trustee functions and powers, general meetings, voting rights and procedures, and owners' entitlement and duties.
The underlying aim of a proper constitution is to achieve an acceptable balance, and to oversee the dealings of the developer, local authority and home owners with the association in the collection and management of levies for the upkeep and maintenance of communal areas of the development.
It is in the sale agreement that purchasers become contractually bound to become members of the HOA, subscribe to its constitution and abide by the decisions of the trustees.
The first trustees are usually developer trustees and member trustees elected by the owners of stands in the scheme.
The developer may retain the right to override decisions of the HOA until such time as he is no longer an owner of any unit or development right.
The HOA management committee prepares budgets to determine levies. They may be empowered to collect the levies, contract for goods and services, delegate functions and to take action against members who default on levies or break the rules.
Importantly any major decisions likely to have a significant impact on owners should be voted on by all HOA members.
Members may be required to get HOA approval before embarking on, among other things, renovations, alterations or additions to their dwellings.
The developer may retain the exclusive right to approve or reject building plans during the development period.
If necessary, the HOA may apply to interdict a member from continuing with building operations until it has approved the relevant plans.
The developer may insert a clause in the rules to the effect that they may be changed only with his written consent until such time as the last erf has been sold and transferred in the development scheme.
He may also provide that during this period he shall have the right to vary, alter, retract or add to the rules and memorandum and articles of association.
A developer must prepare architectural and development guidelines setting out the procedures, requirements and guidelines which all building plans must comply with and which must be adhered to by every member who wishes to do improvements or alterations.
Provision
A developer can include a provision in the constitution that owners may not sell a stand or a home in an estate within a given period after transfer or that they need to obtain permission from the HOA to sell.
This protects the developer who still has properties to sell in the estate. If he still holds the majority of the stands available in the estate, it will be difficult to amend the rules because he, as the owner of unsold properties, still commands many HOA votes.
It is important that owners in estates are active participants in the decision-making process and they should be fully aware of what they are agreeing to when they sign the sale agreement.
Property Guide (Sunday Tribune)
Posted at 10:42AM Nov 16, 2009 by Editor in Residential |