So you want to create a gated community in South Africa – a peaceful local, secure community, surrounded by good neighbours, and peaceful streets where children play and thrive. So, how do you create a homeowners association (HOA)?
What is a Home Owners Association (HOA)?
A homeowners association (HOA) is a legal body created to govern communal living estates. With an HOA, individual properties are exclusively owned (full title properties) while the common communal facilities and infrastructure are owned by the association. In some cases, it could just be the booms and guard house. The HOA has a mandate to manage and maintain common areas, managing and maintaining common areas and enforcing rules and regulations that govern the use of these areas. HOAs can also provide other services to members, such as security, garbage collection, and landscaping.
Creating a Homeowners Association (HOA) in South Africa can be fairly complex – and navigating this world can be equivalent to trying to heat your cup of coffee by blowing on it – but it is possible. So, let’s get started on the how-to.
What Legal Structure is Required for an HOA?
An HOA could either be registeredd as a non-profit organisation or a created as a common law association.
- Non-profit company: You will need to register it with the Companies and Intellectual Property Commission (CIPC) and will operate under the Companies Act. By doing so, it offers more administrative flexibility but involves greater registration and reporting requirements.
- Common law association: If you want to ‘wing’ it, you can use this as no formal registration necessary. It is governed by its own constitution agreed upon by members.
HOA Legislation and Sectional Title Schemes
Although both have rules that members need to abide by, the legal framework is vastly different. Sectional title schemes is a legal structure where everyone owns a section in the property. It is also governed by the Sectional Titles Schemes Management (STSM) Act. To understand what a sectional title is, check out this article on what is sectional title and how it works.
HOA regulations differ from those of sectional title schemes as there is no specific legislation that directly oversees HOAs. Instead, HOAs are managed by their founding documents, which typically outline the HOA’s purpose, rights, and responsibilities of its executives and its members.
Establishing the HOA
To establish an HOS, you need to get support of the majority of home owners in an area – otherwise it would just be silly to continue. Here is the main steps:
- Gather interested residents: Gauge support and outline the purpose and benefits of an HOA.
- Draft a constitution or memorandum of incorporation: This document outlines the HOA’s structure, rules, responsibilities, voting procedures, and other key aspects.
- Elect a Board of Directors: Hold an inaugural meeting to elect a board or committee responsible for managing the HOA, overseeing finances, and enforcing regulations.
- Register the HOA (if applicable): Non-profit companies require CIPC registration.
More Considerations Before Creating an HOA
Creating an HOA can be daunting and complicated. It is recommended that you seek legal advice to make sure everything is covered from a legal and financial perspective. For example, if you want to boom off your area, you need to comply with provincial and municipal bylaws. There are some info here on the Tshwane applications. You probably will also need to get accountants, lawyers and property managers involved, depending on the goal of your HOA.
You will also need to do operational things such as collecting levies or fees, maintaining common areas, enforcing rules, and communicating effectively with residents. It is also important to create the right system for dealing with rule breaking, how and when meetings will be held and when/how representatives will be chosen.
Conclusion
Embarking on the journey of establishing and operating an HOA demands commitment and a focus on good governance. Tailoring the HOA’s framework to address the specific needs of the community ensures a harmonious living environment. Transparency, fairness, and effective communication are essential pillars for the successful functioning of the HOA, fostering a sense of community and enhancing the property’s value in upscale residential settings in South Africa.
Happy investing!