By Prof. Graham Paddock
The fundamental concept that underlies this title type 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’).
Home owners’ association 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 a HOA development, each owner obtains a 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 home owners’ association 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.
In a home owners’ association development the infrastructure and any other ‘common parts’ are usually transferred to and registered in the name of the HOA, whereas in sectional title schemes, common property is owned in undivided shares by all the owners of sections and only administered by the body corporate of the scheme.
HOA developments are like sectional title schemes in that:
(a) each member of the management body is also the registered owner of a property in the development;
(b) both types of developments are ‘community schemes’ for the purposes of the Community Scheme Ombud Service Bill;
(c) there is financial and administrative interdependence amongst owners;
(d) there is control of individual behaviour and dealings with individually owned property;
(e) membership of the management body is compulsory for all owners of individual property;
(f) the management body taxes its members to raise funds to perform its functions, and
(g) individual property cannot be transferred without a clearance certificate issued by the management body.
The two forms of development are different in that:
(i) sectional title development scheme involves ownership of common property in undivided shares, whereas a HOA does not;
(ii) in a HOA development, the infrastructure is usually owned by the management body;
(iii) sectional title provides for ownership in different levels or strata on one piece of land that forms part of the common property, whereas in a normal HOA development each separately owned building is on a separate piece of land (although it is possible to have a sectional title scheme developed on a property within a home owner’s association in a ‘layered scheme’);
(iv) in sectional title, it is usual to have parts of the common property made subject to rights of exclusive use in favour of particular owners or groups of owners. This concept is not ordinarily part of a HOA development scheme although analogous arrangements are possible, and
(v) the common property, sections and registered exclusive use areas in sectional title developments are shown on one or more sectional plans, whereas the property in a HOA is shown on a general plan or separate diagrams.
Article reference: Volume 5, Issue 1, Page 1.
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