Suing the HOA Management board

Is it possible to sue the HOA management board for not running the HOA correctly? If so, would it be advisable or would you suggest trying alternative routes first? These questions lead automatically to other questions: what does “correctly” mean? … Continue reading →

Levy arrears: Is lock-out Sectional Title owners lawful?

In pursuance of its duty to collect levies from members, a body corporate should take immediate steps to recover any arrears. But you cannot take the law into your own hands – you will be penalised if you do! In … Continue reading →

Twin body corporate

The owners in the scheme known as Twin Oaks do not get along. Trouble is, the entire body corporate is now at loggerheads. Yes, 50% of the owners are pitted against the other 50% in disputes and unpleasantness. How come? … Continue reading →

Termination of a managing agent’s contract

In a hypothetical scheme, some owners are unhappy with the quality of services provided by the managing agent. These owners want the managing agent removed and a different one appointed. Is this possible and if so, what do they have to do … Continue reading →

Decision making in HOAs

A homeowners’ association (HOA), whether it be a small residential complex or a golf estate, is a community scheme and its members are entitled to a say in how it is run. How is this achieved? As in all democracies, … Continue reading →

HOAs and Sectional Title schemes are not the same

There seems to be some confusion of late as to the differences between home owners’ associations (HOAs) and sectional title schemes.

Sectional title is a legal arrangement in terms of which parts of buildings can be exclusively owned, in conjunction with shared ownership of other parts of the buildings and the land.

The fundamental concept that underlies this type of title is an abstract division of buildings into some parts that are owned in undivided shares by all participants (referred to as “common property”) and other parts that are exclusively owned (referred to as “sections”).

The Sectional Titles Act, a national statute that applies to the formation and operations of all sectional title developments, also makes provision for “exclusive use rights” in terms of which the owner of a section, who is also the co-owner of all the scheme’s common property, may enjoy the benefits of an arrangement with the other co-owners that s/he alone will have the right to use a specified part of the common property.

HOA developments, by contrast, operate on the basis of a combination of direct and indirect conventional ownership. There is no special type of title involved and no national statute that specifically regulates their formation or operations, although the Companies Act applies to those HOAs that are formed as non-profit companies.

In an HOA development, each owner obtains registered title to a conventional property held under a title deed and described on a registered diagram or general plan (“kaart en transport”) as with any other conventional land in a South African township.

But in addition, each owner of an individual property in an HOA development is automatically a member of the HOA that is usually the registered owner of the development infrastructure. In this case, each owner has indirect rights to the HOA’s property as well as the other rights and obligations that are associated with that membership.

HOAs are one of the biggest and fastest growing sectors of the South African property market. There is a considerable need for Knowledgeable managers for these associations, and thus HOA management can be a lucrative niche for property managers.

Rob Paddock is the operations director for Paddocks. Feel free to visit the website atwww.paddocks.co.za or for free sectional title advice go to www.sto.co.za

Total Deviation

I think that the discussion regarding the above now seems to have deviated totally from the original question. The latest response from Dudley Lee (Three aspects response goes down another road altogether. The question as to whether the arrears are preferent or concurrent is not really at issue. To the best of my knowledge there has already been a High Court judgment in this respect and I am of the opinion that where a body corporate, in a sectional title scheme, which body corporate has been established by law, is involved, the matter is certainly different to where an HOA is involved. I have yet to come across an HOA that is established in terms of a Law.

The question is as to whether the Registrar’s conference was correct in issuing the original resolution and then whether the Chief Registrar was correct in withdrawing that resolution. I think it is important to consider the reason for such a condition, requiring a consent, being inserted in the title deed. Such a condition is inserted either at the instance of the developer or as a condition for the approval of the subdivision by the local authority. The reason for such a condition is to ensure that the complex itself will be properly regulated and maintained. The only way that the HOA can claim contributions from owners is on a contractual basis and this is established by insisting upon a contract being entered into before a certificate is issued and therefore before transfer is registered. If transfer is registered without such a certificate, the HOA would find it very difficult to recover future levies from an owner and would not be able to finance the maintenance of the complex. This would lead to a reduction in the values of properties in the complex and would also lead to financial institutions refusing to grant loans for the purchase of properties in such a complex. One can to some extent use the analogy of the supply of services by the local authority to an owner of a property. The local authority insists that the owner pays a deposit and signs a contract, before the local authority supplies services. The same applies with the HOA.

I am of the opinion that if the Registrar allows the transfer to proceed without such a certificate, and the HOA suffers a loss as a result, the HOA may have a claim for damages against the Registrar. The damages would not relate to outstanding amounts prior to transfer but would relate to loss of income to the HOA after transfer. It is even possible that owners could claim damages from the Registrar if they felt that the value of their property had been reduced as a result of the failure of the Registrar to insist upon a certificate in terms of the condition in the title deed.

There is no doubt whatsoever in my mind that the Chief Registrar was correct in withdrawing the conference resolution.

Kevin Mahon
Attorney, Notary and Conveyancer
JB HUGO & CRONJE INC
kevinmahon@hugocronje.co.za

Source: http://www.ghostdigest.co.za

Sectional title trustees can’t dodge responsibilities

The Sectional Titles Act recognises that the trustees of sectional title bodies corporate, unlike the directors of independent companies, are unpaid volunteers and may lack the full experience required for their positions.

For this reason it indemnifies trustees against prosecution for what are clearly errors, but still retains its full powers should they try to defraud their schemes or act with gross negligence.

Although protected in this way, sectional title trustees are responsible for the financial health of their schemes, the care and maintenance of their buildings and facilities and the welfare and security of their members, says Michael Bauer, general manager of IHFM property management company.

“It is all too easy for a trustee to take the attitude that the body corporate was desperately short of volunteers so they have allowed themselves to be elected, but that not much should be expected of them. This laid-back approach to a trustee’s responsibilities can be very harmful to a body corporate,” he says.

“There will be times when trustees need to be proactive and, possibly, hard. They have to stand up to members who are letting the side down by not paying their levies or by behaving in a way that is distasteful to other members. This can be uncomfortable if trustees are living in the same scheme as those who need to be disciplined. It often makes being a trustee unpopular – but that is something they have to accept.”

He says many trustees have come from backgrounds where they had no or limited chances to acquire financial, accounting or legal knowhow. But this does not alter the fact that they have to get to grips with the sectional title scheme’s accounts, if necessary calling in an accountant to help them.

“A “get-involved” message has also to be given to body corporate members: if they don’t attend special and annual general meetings, they have only themselves to blame if things go wrong.

“Not long ago, the slackness of members and their trustees in a certain scheme allowed a managing agent (who was later declared bankrupt) to misappropriate funds and to accumulate R500 000 in municipal charges arrears. Had the members attended the AGM and discussed the accounts or taken them to a creditable auditor, the problem need never have arisen.

“One of the trustees’ most important tasks may be to appoint a good managing agent. Here experience has shown that it can be unwise to select an estate agent, even one who may have been highly effective as a salesperson.

“Good salespeople are not often good administrators because they usually dislike clerical and figure work. The ideal managing agent would be an accountant with a good dose of common sense and a sound understanding of the Sectional Title Act for legal matters.”

Source: SA Property News http://www.sapropertynews.com

Managing Sectional Title Property

This gallery contains 1 photo.

Lifeblood of the body corporate Whether you are an owner, a trustee, a managing agent or an attorney, you will agree that levies are essential to the efficient running of sectional title schemes. Levies are the ‘lifeblood’ of the body … Continue reading →

Whose property is it anyway?

We’ve just gone to the polls to put our X where our mouth is, and hopefully the bad guys are out and the good guys are in. But when it comes to more personal matters, are we as decisive?

It’s all about service delivery, and government is not the only area where it’s sadly lacking. As a member of a body corporate or property owner’s association that employs a property management service, you are exposed to the good, the bad or the downright incompetent. If it’s either of the last two, what are you doing about it?

The people have learned the value of burning tyres and lobbing bricks to get their point across. A bit extreme, but a lesson nevertheless. All it needs is a decisive ‘no’ to rid yourselves of poor service when it comes to property management. If you are in any doubt about taking the step to replace your agents, just remember, it’s no exaggeration to say that the value of your property is determined by the quality of its management service. Try selling a unit in a body corporate whose finances are in the red.

Take the test and see how your property management rates: -

Do you know what your levies are spent on? Do your levy invoices arrive on time and are they correct?  Do you receive regular financial reports?  Are insurance claims properly dealt with? Have you had to pay a special levy because expenses have not been adequately provided for? Is the BC/managing agent responsive to your concerns and queries? Are you subsidising owners who are not paying levies? Are levies being increased because of bad financial management – or lack of recovery of?

Just one iffy answer to any of the above, and you need to make a call.

De La Porte Property Management (DLP) offers you a fresh, comprehensive, professional service at a price that suits the requirements of your complex. So the cost is entirely in line with your budget, and could save you money. We are members of the National Association of Managing Agents (NAMA) and align ourselves with its code of conduct. And just so you know we take this whole business seriously, we use the industry’s ultimate property management software.

Our services include (but are by no means limited to)  Commercial, industrial and residential property management.  Day to day maintenance and operational support.  Arranging and attending POA meetings, arbitration hearings, AGMs & more …  Practical application of our in-depth knowledge and understanding of Sectional Title and general property legislation.

We also offer a bookkeeping service with additional benefits, at nearly half the price of the industry standard, for smaller complexes that either can’t afford or don’t need the full management service.

Call us on 021 551 9777 or email us on admin@delaporte.co.za or take a look at our website www.delaporte.co.za to see a detailed list of our services and to find out more about what we do.

Companies Act No. 71 of 2008 is in operation

By Graham Paddock

The new Companies Act that came into effect on 1 May 2011 has been described as “a revolution for South African corporation law”. While this replacement legislation is arguably the most important statute that exists from a South African commercial law perspective and is certainly a fresh start for company law, in my view it is an evolutionary development rather than a revolutionary one.

The provisions of the new Act and its Regulations, Forms and Notices, all of which are available online in Paddocks Club, updates South African company law and brings it in line with that of our major trading partners. Our company law has always been closely modeled in that of the United Kingdom, as has that of Canada, Australia and other Commonwealth countries. The new legislation integrates the best practices of these analogous jurisdictions, most notably Canada, with South African common law and commercial requirements. It also takes into account the recommendation of the King Commission reports and thus signals a fundamental shift in corporate governance principles.

The Act is much more accessible than its predecessor, being drafted in plain language and logically structured. My principle interest in the Act is its effect on Homeowners Associations that were established as section 21 (now “non profit”) companies. In this article I will give a very brief overview of this newly implemented legislation.

First, some highlights:
1. While the Close Corporations Act will remain in force for as long as it is needed to cater for existing CCs, it will be amended so as to incorporate the new features of the Companies Act. No new CCs can be formed.
2. The new Act provides a simpler approach to corporate structures. There will only be Profit Companies (of which there are just a few types) and Non Profit Companies. All new companies will have a single fundamental governance document, a Memorandum of Incorporation.
3. Directors are more strictly responsible and their responsibilities and liabilities are more clearly set out.
4. There is a requirement for “plan language” in company communications
5. There is provision for electronic communication and online meetings.
6. A local variation of the “business judgment” rule has been introduced.
7. Most of the sanctions for non-compliance with the requirements of the new legislation are civil, not criminal.

Looking further at the issue of accessibility, the Act consists of 225 sections (the previous legislation had twice as many) and they are clearly labelled. The government has created a really impressive Commission website: www.cipc.co.za, at which all the legislation, forms and many guidance documents are available.

The South African version of the business judgment rule is worth looking at in detail. The Act provides that a director is protected against actions for breach of the duties of care, skill and diligence and the duty to act in the best interests of the company in relation to a matter where that director has:
(a) taken reasonably diligent steps to become informed about the matter,
(b) either had no conflict of interest in relation to the matter or complied with the rules on conflicts of interest and
(c) had a rational basis for believing, and did believe, that his decision was in the best interests of the company.
In acting as such, a director may rely on information given by and actions taken by persons such as employees and advisers who that director reasonably believes to be reliable and competent.
These provisions mark a step towards greater accountability on the part of directors – no more initialing at the bottom right of each page without looking at the content, at least not without risk!

As to structure, the Act is divided into 9 Chapters and it has 5 Schedules. The Regulations are divided into 8 Chapters and they have 3 Annexures. Finally there are a set of Forms and Notices. Given the very wide scope of commercial and non-commercial activity that is governed by the new Companies Act, it is as compact as it could reasonably be. No one said it was going to be really short, so we each need to identify the bits that apply to our activities and read them.

For the directors of home owners’ associations, I suggest the following initial readings:

In the Preamble & Chapter 1: Interpretation, Purpose and Application I suggest you first look at Part A: Interpretation and focus on section 1. Definitions and 5. General interpretation of Act. Then in Part B: Purpose and application, read sections 8. Categories of companies and 10. Modified application with respect to non-profit companies.

In Chapter 2: Formation, Admin. & Dissolution, head for Part C: Transparency, accountability and integrity of companies and go through section 24 to 34. These cover important issues of company records, information and returns. In Part F: Governance of companies, I suggest that you hunker down and read sections 57 to 78. These cover internal company governance issues such as member’s rights, meetings and directors – all important material.

Have a quick look at Chapter 6: Business Rescue and Compromise with Creditors (the new procedures that replace the previous Judicial Management provisions) and then in Chapter 7: Remedies and Enforcement, go to Part B: Right to seek specific remedies and look at sections 162 an 163. Chapter 8: Regulatory Agencies and Administration of Act deserves a quick look and then in Chapter 9: Offences, Miscellaneous Matters and General Provisions I suggest you go to Part A: Offences and penalties and read sections 214 to 217.

Of the Schedules to the Act, I suggest that you read both Schedules 1 and 5 carefully. In the Regulations I suggest that you should look Chapter 2 – Formation, Administration and Dissolution of Companies, Part C– Transparency, accountability and integrity of companies. Here regulations 21 to 30 are important, dealing with company offices, records, information, financial years, reporting standards and annual returns. And by the way, all HOAs will have to render annual returns.

Right, so here is what you have to do:
(a) Get access to a copy of the Act, Schedules, Regulations, Annexures, Forms and Notices. Bear in mind that the original Act 71 of 2008 was amended by Act 3 of 2011 just before it came into operation, so make sure you have the amended Act. (All of these documents are accessible online to members of Paddocks Club under the heading HOA in the Library.)
(b) Start by reading the parts identified above – you won’t struggle with the language.
(c) Go to http://www.cipc.co.za/ and look around, read the explanatory texts and bear in mind that the prescribed forms have a lot of embedded explanatory material, so they are worth going through.
(d) Starting now, apply the provisions of the Companies Act 71 of 2008 to your corporate Homeowners Association and bear in mind your new responsibilities as a director under this Act.

Source: http://www.paddocks.co.za

We are proud of our bookkeeping service

De la Porte says that the use of professionals is usually money well spent and need not cost a great deal. His company, he says, for instance, offers a bookkeeping only service for smaller bodies corporate that can’t afford a full service manager. Trustees remain in control of maintenance and daily duties, but receive professional bookkeeping services.

“We allow our clients to choose from a menu of services for which we charge individually, and we also consult on an hourly or contract rate. This could include attendance of AGMs or other meetings.

“The inverse to the bookkeeping only service is our management and maintenance facility, where clients want to manage their own finances and do their own letting but don’t want to handle day-to-day maintenance.”

Sectional Titles Act amended

The Sectional Titles Act 95 of 1986 has been “extensively amended” by Act No 11 of 2010, which was assented to by the president on December 03 2010. “Most of the amendments are, however, of a technical nature, although there … Continue reading →

Mixed-use homeowners associations

What does Century City, home to Ratanga Junction theme park and Canal Walk, one of the biggest shopping malls in Africa, have in common with the little gated complex around the corner from where you live?

They are both property owners’ associations incorporated under Section 21 of the Companies Act.

Large property developments such as Century City can be organised under a single, overarching management body, or property owners’ association, that has subsidiary schemes that cater for a variety of development needs. These could be commercial, residential, leisure and retirement. The different subsidiary schemes are most commonly other property or home owners’ associations and sectional title schemes, whichever is most suitable for the intended use. For example, the subsidiary schemes could be one or more home owners’ associations of freestanding homes in a secured area, cluster housing in a sectional title scheme, or retail and commercial nodes which are sectional title schemes or freehold properties on separate erven in the master development, as is common with shopping malls.

This development methodology is, of course, extremely complicated but has the major advantage of allowing each different scheme to manage itself. The system is, practically speaking, a delegation of management functions to the entities most interested in and most qualified to manage the individual schemes. The governance documentation of each scheme, as well as making all the necessary provisions for the management of that scheme, details its obligations to the overarching or master scheme. One of the conditions of title will be the obligation that the scheme be a member of the master association. The subsidiary schemes levy their members to cover their own costs and the schemes in turn make their own contributions to the running costs of the overarching body. There are almost always other responsibilities to the master association as well, such as compliance with appearance, architectural, landscaping and use requirements.

The arrangement of responsibilities and obligations should be reciprocal, ensuring that the best interests of all in the development are promoted.

Anton Kelly is one of the Course Conveners of the Paddocks Home Owners’ Association Management course. 

Source: http://www.ghostdigest.co.za/code/A_2143.html

Administration and Risk Management in Property Management

Administration and risk management is a critical component of real estate property management. The record-keeping function must be carefully managed and, the greater the level of detail, the better the likely results. This function involves all the others, as: the … Continue reading →

Tenant and Occupancy Management Function of Property Management

A property can be nicely designed and in a desired area, but it will not be a profitable rental property if tenants aren’t managed properly and occupancy maintained at a high level. When tenants are not happy, they vacate at … Continue reading →

The Financial and Marketing Functions of Property Management

Property management operations budgeting: The real estate property management company, in consultation with the owner, will prepare detailed budgets for the day to day operations of the property. This function involves aspects of all the other functional areas, as it … Continue reading →

Property Management Areas of Responsibility

In property management, the property manager or management company has four major areas of responsibility: Marketing and Financial Tenant and Occupancy Facility Administration & Risk Management The property manager is the owner’s partner in maximizing the return on investment of … Continue reading →

Sectional Titles Act ‘extensively amended’

The Sectional Titles Act 95 of 1986 has been “extensively amended” by Act No 11 of 2010, which was assented to by the president on December 03 2010. “Most of the amendments are, however, of a technical nature, although there … Continue reading →

Tips for body corporate administration

We all know that a good corporate body is a key element in making sure that a sectional title scheme can function properly in South Africa. This group of people as to contribute to the sectional title community and try … Continue reading →