Buying into security estates are a good move - provided the necessary checks are carried out

South African property journals today regularly feature articles stressing that homes in gated security estates have become more valuable and are appreciating faster than unprotected, freestanding homes.  

Generally, says Bill Rawson, Chairman of the Rawson Property Group, such homes — whether townhouses or individual units — are priced at roughly 30% more than the equivalent size and quality homes on their own freehold plots, outside an estate – despite gated estates charging monthly levies which can be punitively high.

Despite this, says Rawson, certain people shy away from purchasing in security villages because they fear that in some way the value of their home might be affected if developers land in financial difficulties.

While such financial mishaps can possibly affect the overall image of a scheme, says Rawson, serious examples of this happening in gated estates are relatively few and far between – and the prime reason for this is that at a fairly early stage in any development (i.e. often well before it is anywhere near completion) the control of the estate is handed over to a Home Owners’ Association (HOA).

In South Africa, says Rawson, such associations have to date generally proved effective.

“The reasons for this”, he said, “is that they are strongly motivated by the fact that those running them have a strong vested interest in ensuring that standards are maintained and the property is well cared for.  Home Owners’ Associations tend to enforce estate rules vigorously and ensure that they conform to the estate’s rules and ethics which are agreed to by the buyer on taking transfer.”

“In particular”, said Rawson, “South African law places a very big responsibility on members of Home Owners’ Associations to maintain ‘fiduciary discipline’.”

What this means is that, among other things, committee members of an HOA are, by law, prevented from having interests in any organisations serving the estate unless this interest has been declared upfront and been agreed to by the other members.  They are also prevented from pursuing their own interests instead of those of the other members, e.g. by monopolising the services of a gardening team or ensuring that repair teams give their property extra attention.

In particular, said Rawson, South African law stipulates that HOA committee members have to be exceptionally transparent about the estate’s financial affairs and have to report on these to members regularly.

Any undue delay in this matter, he said, entitles the other members of the association to take the committee to court where, if the delay is proven to be excessive, they can be in serious trouble.

In addition, said Rawson, under the new rulings, the HOA has considerable power to ensure that members abide by their financial obligations – especially by paying their levies.  Following a recent case, the committee can now prevent the sale of any property in arrears with its levy payments, even if it is in the hands of liquidators.

Asked what steps buyers should take before signing for a home in a security estate, especially if they are buying off-plan, Rawson said the best thing they can do is to check on the record of the developer by insisting on seeing the HOA accounts of previous schemes on which they have been involved.  By law, he said, developers are obliged to give these to any interested party. If the decision is then made to take the plunge and buy, the new purchaser should make every effort to get onto the HOA committee himself and then to influence the decisions in a way that will be beneficial to the estate as a whole. 

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