HOA Governance

Category Advice

Some very important questions are answered for every owner of a property within a security village i.e. member of the HOA.

1.  The two types of HOA's and to which legal authorities are they accountable?

  • In the event that an HOA is established as a Common Law association, its constitution and rules form its governance documentation and apply to the members of the association. The local Department of Planning and Building Development Management (in whose jurisdiction the HOA is situated) is the custodian of the HOA's constitution
  • Should the HOA be registered as a non-profit company ("NPC"), its memorandum of incorporation and rules as well as the Companies Act apply to its members. The memorandum of incorporation and rules must be submitted to and registered with the Companies and Intellectual Property Commission ("CIPC"). 

2.  What does accountability mean in terms of HOA's?

  • The Community Schemes Ombud Service Act (CSOSA), its Regulations, the Schedule to the Regulations: Levies and Fees, as well as any operational guidelines published by the CSOS apply to all HOA's.
  • This implies that the trustees of a common law association or the directors of an NPC must ensure that the HOA is registered with the CSOS and that copies of the prescribed documents, such as the HOA's annual return, annual financial statements, and governance documentation (and updates thereof) are submitted to CSOS.
  • The CSOSA prescribes that every HOA must ensure that it obtains the minimum amount of fidelity insurance cover, as represented by the total value of the HOA's investments and reserves at the end of its last financial year, and twenty-five percent (25%) of its operational budget for its current financial year

3.  What amount of levies are payable to CSOS?

The HOA is obliged to collect prescribed monthly levies from its members that must be paid to CSOS on a quarterly basis. This levy amount is calculated as the lesser of R40.00 or 2% of the amount by which the monthly levy charged by the HOA exceeds R500.00.  

4.  What are the duties of the executives of the scheme?

The CSOSA sets out the duties of trustees of a common law association or the directors of an NPC as scheme executives. These include:

  • attendance at, and preparation for, all executive and general meetings; 
  • the taking of reasonable steps to inform and educate themselves about their scheme, and its governance documentation; 
  • the taking of reasonable steps to obtain sufficient information and advice relating to any matter due to be decided on, in order to make conscientious and informed decisions in their executive capacity; and 
  • the exercise of an active and independent opinion in respect to these decisions. 

5.  Which HOA rules are deemed to be non-compliant by the CSOS?

Below is the list of provisions of rules that must be servered fromthe community scheme rules and are regarded as non-compliant.  This list is not exhaustive and included all prohibitions contained in the STSMA

  1. Prohibition on slaughtering of animals for ritual purposes;
  2. Disconnection of electricity or essential services for non-payment of levies;
  3. Imposition of penalties without folloing due process;
  4. Issuing of penalties equal or more than double the applicable monthly levy;
  5. Termination of lease agreement by or at the instance of Trustees or eviction of tenants;
  6. Use of specific, accredited or registered service providers;
  7. Referral of dispute to Private Arbitration;
  8. Interest rates that are in contravention of the National Credit Act, 2005 and its Regulations;
  9. Any discriminatory rules against any person, particularly, domestic workers.

6.  How can a member or tenant of a scheme resolve a dispute with the HOA or between members?

  • The CSOS may be approached in the event of a dispute and all internal remedies have been tried and exhausted.
  • There is a prescribed complaint form on the CSOS website to be completed and a process to be followed, in order to obtain the relief sought on one or more of the prescribed grounds, as set out in the CSOSA.

Pam Snyman CPRE (NQF Level 7)

(MPhil, Dip Advanced Property Practice, Dip Property Investment & Valuation)

Author: REDZetc

Submitted 17 Oct 19 / Views 123