Home Owners Associations
Unlike Sectional Title schemes, where body’s corporate are established automatically in terms of the applicable legislations, free hold estates have to create a “body corporate” to enforce the rules, control, administer and manage the estate for the benefit of the owners of the properties in the estate. A Home Owners Association is a property owners’ association which represents a body of multiple owners in full title or freehold housing schemes as opposed to Sectional Title schemes.
When a developer applies to the local authority to open a township which is intended to be used as an estate, the local authority will make it a condition of establishment of the township that before any property is transferred to the new owners, that the developer must establish a Home Owners Association, and ensure that the common property is transferred to the Home Owners Association.
A Home Owners Association can be established by a constitution in terms of common law, but it is more common to establish it as a Section 21 Company, which is a non-profit company. The company will have a board of directors, which perform the same function as trustees of a body corporate, and all owners of properties in the estate will be a member of the company. Through a condition in their title deed, all owners will be subject to the rules and regulations established by the company. At the stage that the company is established, its memorandum and articles of association will allow for the creation of rules and regulations for the management and control of the estate.
Home Owners Associations have been given two years to move from their existing memorandum and articles of association to a new memorandum of incorporation (MOI). The ideal MOI is based on the Sectional Title model which contains management rules which can only be changed by a unanimous resolution of a body corporate, and conduct rules which can be changed far more easily. To change the MOI will require a special resolution of owners, whilst the annexures can be changed by the directors. Home Owners Associations have until 1 April 2013 to register their MOI.