There is currently no legislation that provides specifically for the management of home owners’ associations (HOAs). However, there is legislation that applies to how HOAs are established. The acronyms that will become familiar are SPLUMA and LUPA.
1. SPLUMA is the acronym for the Spatial Planning and Land Use Management Act, 16 of 2013, which was implemented in July 2015.
2. LUPA is the acronym for the Western Cape Land Use Planning Act, 3 of 2014, which was enacted in terms of SPLUMA and also came into effect in July 2015. LUPA enables municipalities in the Western Cape to implement their own land use planning bylaws.
The City of Cape Town was the first municipality in the Western Cape to implement a land use planning bylaw in terms of LUPA, and issued the City of Cape Town Municipal Planning By-Law, 2015 (CCT MPB), which became effective on 1 July 2015.
Previously in the Western Cape, the Land Use Planning Ordinance of 1985 (LUPO) made provision for local municipalities to approve new subdivisions of land, on condition that a home owners’ association be established to manage the subdivision. There is similar legislation in some other provinces.
What’s the same?
LUPO made bare bones provisions for home owners’ associations:
- The association had to be a corporate body.
- The constitution of the HOA had to have as its object the control and maintenance of the buildings and facilities in the HOA; it had to provide that the members of the association were the owners of the properties in the subdivision and that they together paid all the associations costs; and it had to be approved by the municipality, to ensure that it contained the object and membership requirements of LUPO.
- LUPO also allowed the municipality to address any failure of the association to meet its obligations and to recover the cost from the members.
A vitally important point, and one missed by many dealing with the establishment or management of HOAs, is that LUPO applied not only to HOAs established in terms of the common law, but to those established in terms of the Companies Act as well, irrespective of the references in LUPO to the association’s “…constitution…”.
CCT MPB makes the same conditions as LUPO for approval of the subdivision, but in more detail and makes some significant additions. Examples are, that the association comes into existence on the transfer of the first unit arising from the subdivision; that the developer must call a first general meeting of members within a specified period; that the members must elect trustees at that meeting; and that the developer must supply the municipality with a copy of the minutes of the meeting.
CCT MPB gives a list of provisions that must be in the HOA’s constitution and allows for two that may be included.
The required provisions are much as we commonly see in current, well drafted HOA constitutions, such as that the association must act in the collective best interests of its members; that it must manage the association’s communal facilities; that it must approve the transfer of properties in the HOA – effectively empowering the association to withhold a clearance certificate – and how it enforces the terms of the constitution.
Interesting new provisions that must be included in the constitution are that the association must enforce any conditions the municipality makes when approving the subdivision, and that it must provide for the transfer of land if the association ceases to function.
The two provisions that the constitution may provide for are building and landscaping guidelines, and the implementation of fines for members who do not comply with its terms.
It’s worth emphasising that, like LUPO, CCT MPB applies to all HOAs, those that are established as non-profit companies as well as those that are established as common law associations, even though the term used to refer to the governance documentation is “constitution”. The Memorandum of Incorporation (MOI) of a non-profit HOA company is, in effect, its constitution.
Your HOA’s governance documentation
The questions now being asked are, does CCT MPB apply only to HOAs established after 1 July 2015, and do existing HOAs in the Cape Town area have to alter their constitutions/MOIs and have them approved by the municipality?
CCT MPB applies to all HOAs, and has done since 1 July 2015, but our view is that there is no legal obligation for a pre-existing HOA to change its governance documentation to include provisions of CCT MPB that it currently lacks. However, it’s definitely a good idea to have a specialist look at it, firstly to check that it does not contain any provisions in conflict with the new legislation, and secondly to take advantage of new legislation, technologies and practices by including, for example, sending meeting notices by email, enabling electronic participation in meetings, and establishing and providing information to members via a dedicated website.
The Community Scheme Ombud Service (CSOS)
This article is written to clarify the position of HOAs in the Cape Town area with respect to the City’s planning by-law and its application to HOAs, but there is another reason to have a specialist look at your HOA’s governance documentation.
The Community Schemes Ombud Service Act 9 of 2011 (CSOSA) applies to all community schemes with respect to dispute resolution. That is not to say that community schemes, including HOAs, cannot include dispute resolution processes in their governance documentation, indeed the CSOSA requires that a dispute be referred to the scheme’s own dispute resolution process, and for that the process to have failed before it can be referred to the CSOS for adjudication. Therefore, the dispute resolution processes contained in the governance documentation of HOAs should be adjusted with the view to adjudication by the CSOS.
To return to the initial question, must HOAs change their governance documentation and have the changes approved by the City? No, but it’s a very good idea to do so!
Should you require specialist assistance in reviewing or amending your HOA’s governing documentation, contact us at firstname.lastname@example.org or 021 686 3950.
Article reference: Paddocks Press: Volume 11, Issue 07, Page 02.
Anton Kelly is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the lead teacher on all the Paddocks courses for the last 7 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.
This article is published under the Creative Commons Attribution license.