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HOA question and answer

30 July 2015

The following question was received:
What happens in the case where there is no mention of a HOA in the title deed or purchase agreement? Although it was a condition of the local council to become a member of the HOA once properties were purchased.

To which Heinie Barnard responded as follows:
I am of the opinion that the property is not part of the HOA. If the property is sold it will be sold as any other freehold property; because there is no condition in the title deed that a clearance certificate needs to be produced by the HOA. HOAs’ have different legal statuses in each province.

In terms of section 29 of the Land Use Planning Ordinance (Cape) No 15 of 1985, (LUPO) legal personality for HOA’s arises automatically. Nevertheless a constitution should deal with its status in greater detail, including related matters such as its location, formal name and domicilium citandi. Membership also arises automatically in terms of LUPO (Cape), yet it should be dealt with in the constitution for the sake of clarity and precision.

In other provinces, where no legislation endows an HOA with legal status, it is essential that membership be made obligatory by means of a suitably worded condition of title in each deed of transfer. Such condition of title also serves as a control mechanism for the collection of levies, ensuring that no transfers take place without levy clearance by the HOA. The Town Planning and Townships Ordinance 15 of 1986 (Gauteng) and the Division of Land Ordinance 20 of 1986 (Gauteng), neither contain any references to HOA’s nor do they attempt to regulate their affairs.

Ensuring that every person buying into the development is contractually bound to become a member of the HOA, subscribe to its founding document and abide by its decisions is typically accomplished in the sale agreement concluded between developer and purchaser which must (at a minimum) provide that:

  • the purchaser agrees to become a member of the HOA and abide by its founding document, rules and decisions of trustees;

  • no transfer of the purchaser’s stand shall be registered without the HOA first having issued a clearance certificate certifying that the purchaser has agreed to become a member and that all levies and other amounts due to the HOA have been paid or secured to the satisfaction of the HOA;

  • the purchaser agrees that such conditions will be carried forward as conditions of title in the title deed to his stand, thereby binding subsequent purchasers of the stand.

Reader Comments: 5
Allen West 30/07/2015:

I would urge readers to read the case of Cape Explosive Works Ltd and Another v Denel (Pty) Ltd and Others 2001 (3) SA 569 (SCA) which is relevant in this instance. We have a negative deeds registration system, and thus such omitted conditions will bind successors in title.

Andrew Murray 31/07/2015:

Well done to Allen to remind us of this case. So my understanding is that in theory, a HOA could successfully stop a transfer from taking place, if the sale had come to their attention. Of course, many HOAs in my town are too small and impecunious to approach the High Court. On the topic of rectifying the omitted title condition, practically speaking, the HOA should have a caveat entered at the Deeds Office, to enforce its rights?

Allen West 31/07/2015:

Andrew I refer you to section 3 (1) (w) of the Deeds Registries Act 47 of 1937 which only allows a registrar to record an interdict on authorization of a court of law of in terms of legislation. If these conditions were erroneously omitted, they can be inserted into the relevant deeds in terms of section 4 (1) (b).  Section 4 (1) (b) has also recently been amended in that the Registrar may be approached, if good cause exists, to note a caveat where all deeds cannot be rectified simultaneously.

Heinie Barnard 02/08/2015:

Without the “exact wording” of the local council condition, it is going to be difficult to determine if the condition constitutes a real or personal right? For the condition to be a real right, it should meet the "Intention test" and "Subtraction from dominium". Willow Waters Homeowners Association (Pty) Ltd v Koka N.O. and Others (768/2013) [2014] ZASCA 220 (12 Dec 2014) Cowin N.O. and Others v Kyalami Estate Homeowners Association and Others (499/2013) [2014] ZASCA 221 (12 Dec 2014) Other questions: Was the HOA incorporated? Does the HOA have a constitution? Does the local council condition specify, which HOA, and that a clearance certificate is required? Can I resign as a member? Etc.

NOMPUMELELO XULU 27/08/2015:

Thank you for this enlightening article as well your comments. Allen, in my case, the HOA condition was omitted in the 11(3)(b) but included in some title deeds and not included in other title deeds in the scheme. Can the 11(3)(b) be rectified by a section 4(1)(b) to incorporate the HOA condition? Your wisdom will be highly appreciated.

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