HOA space registrations should be checked carefully

In typical Homeowners’ Associations the various areas such as roads, the entrance and parks or green spaces within the development are split into categories: public open spaces or private open spaces and these various areas are often remain registered in the developer’s name and are not transferred with the first transfer when the scheme is established. 
In some HOAs, the roads could be private roads, in which case the scheme is responsible for their upkeep and public, where the municipality would maintain and own them. Some of the spaces within the estate, such as parks or walkways, are usually private open spaces, which should be transferred to the HOA. 
Attorneys should from the first transfer of a property in this estate transfer all the public and private open spaces to the HOA, but this sometimes is not done and could lead to cases where it is found that the municipal bills have been mounting up for these various areas over several years because they were never transferred, says Michael Bauer, general manager of the property management company IHFM. 
“I have seen cases where after ten years there is a massive municipal bill due (in one particular case, over R500 000) for the rates and services for an estate and no one is sure of who the various sections of land are still registered to as the developer has by that stage moved on and possibly closed that business,” said Bauer. 
The bigger the estates are the bigger the private open spaces are, and the bills for rates and services to these spaces can be astronomical, he said. 
Where problems creep in is where one home in the development is in the process of being sold, and has applied for a rates clearance certificate, but because his property is linked (via the business partner number) to the outstanding amounts owed in rates or services, he will not get his rates clearance until all municipal accounts have been paid. 
The first thing that has to be established is what is owed by the developer and what is owed by the HOA. The HOA could then try and recover some of the money owed from the developer, if he is to be found or if he is willing to pay towards the outstanding amounts. Many, however, will not volunteer payments as they would have moved on to other business and developments. 
“The unfortunate part of this is that the amounts outstanding will have to be paid by the HOA because the development company will in all likelihood no longer be in existence and there is no entity to claim the money from,” said Bauer. 
The HOA could challenge the amount outstanding but this will take time and they will still have to make some arrangement to start paying off the arrears while they build their case. They would also need to start the process of transferring the various spaces to the correct entities. 
“There are lessons to be learnt from this case,” said Bauer. 
With new developments, the first thing the newly appointed directors or trustees of the HOA should do is an audit, checking the erven and checking if they are transferred to the right entity. The developer will have run a separate set of books up to the first transfer taking place and the HOA must check that all the contracts or services have been transferred to the separate entity names. 
It is very important for the HOA members to read their constitution carefully and verify that the setup is done correctly to avoid problems later, where it is more difficult to sort out, said Bauer. 

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us