By Prof Graham Paddock
Is a new owner liable for a special levy?
1. The audited annual financial statements of the body corporate showed that there was no debt outstanding by the body corporate at date of purchase.
2. Subsequent to purchase date, it transpires that rates shown as being paid were in fact not paid and the body corporate receives a letter of demand for immediate repayment of these arrear rates, with penalties and interest.
3. For various reasons, the body corporate has no recourse to any other means of recovery of this debt other than to raise a special levy.
4. What is the position of the new buyer in relation to their obligation to make a contribution towards this special levy?
Crisply stated, the rule is, “Whoever is the registered owner at the time the trustees take the decision to raise the levy is liable to pay it.”
This can cause apparent inequities, such as in the circumstances you describe. And given the inefficiencies we see in local municipal administration, it is not unknown for rates and service supply accounts to be rendered very late, after some of the persons who were owners in the scheme at the relevant times have gone.
But the legal rule is clear. If the buyer was the registered owner when the special levy was raised, he or she is liable to the body corporate for its payment.
Can rules and architectural guidelines be in an amendable document?
Q2. The HOA is not a registered company. The municipality agrees to amendments provided voting is in writing with 75% in favour.
Is it possible and allowable to have a separate document with the conduct rules and architectural guidelines, with the constitution referring to that document as being “in place and as amended from time to time”?
This document can then be a working document and can even be updated on an annual basis. Please advise.
A2. Yes, it is possible for the constitution of an HOA to make provision for subsidiary governance regulations, such as “rules” and “architectural guidelines” that can be made and amended from time to time without the necessity to change the constitution itself.
But the first enquiry is, “What is the current status of the architectural guidelines and conduct rules?” If those are embedded in the constitution or incorporated into it by reference to a specific static document, the constitution will have to be amended to specifically cater for further amendments by the owners in general meeting or by the trustees.
I suggest that you first make sure that you will get the level of owner support necessary to make these changes. Then take all your HOA’s governance documents to the same attorney you would instruct to enforce their terms and get him or her to help you draft the changes and get them approved by the local municipality and the owners
Article reference: Paddocks Press: Volume 6, Issue 9, Page 4
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