Simple Overview of Homeowners' Associations
When the topic of Homeowners' Association (HOA) is brought up, many new homebuyers are unsure about its roles, functions, and whether or not it applies to them. De Lucia Group has simplified the topic to help those in the dark get more clarity.
Drawing from the explanation provided by Paddocks, an HOA is a legal body in which individual properties are privately owned, while the communal facilities and infrastructure are owned by the association itself.
Due to certain aspects of an HOA, many people confuse it with a Body Corporate - this is a big mistake as they are completely different legal entities.
An HOA is established in boomed off areas or in estates where each homeowner owns a property and the erf or plot in which the property is located. While, the common property such as roads, boundary walls and security fences etc, is usually registered in the name of the association which is separate from its members who do not have any right, title or interest in the common property. Furthermore, an HOA is established by the residents within a community to ensure that an area is well maintained and safety and security are upheld.
On the other hand, a Body Corporate manages a sectional-title development which is divided into parts that are exclusively owned by individual homeowners and other parts that are jointly owned in common areas.
Unlike a Body Corporate, which is created in terms of the Sectional Titles Act and managed in terms of the Sectional Titles Schemes Management Act, an HOA is not created according to any specific national legislation. Instead, there are two types of legal frameworks used to establish an HOA, including:
- A non-profit company (Governed in terms of a Memorandum of Association) or;
- A common law association (Governed in terms of the Constitution)
Regardless of the type of framework implemented, some of the most common functions of an HOA usually involves:
- Ensuring compliance with the estate/community rules
- Maintaining and managing common areas, including the design, aesthetics and upkeep of all buildings
- Entering into service agreements in connection with the development
- Enforcing certain conditions such as subdivision approval or management plans registered with the local municipality
Points to Consider
Members of an HOA generally pay a levy each month so that the association can perform its duties such as maintaining common areas and paying towards security services. As a tip, before you purchase a home, first inquire if it is part of an HOA so that you can budget for these ongoing costs, and if it is, you will need to take the research a step further by finding out:
- Which services are included in the fee and which are not
- The financial history of the HOA by inquiring how often and by how much rates have increased over the past ten years
- Additional information such as how an association manages big projects and whether it has enough reserves to finance these
- What are the priorities and issues by reading the minutes of the previous HOA Annual General Meetings
- The penalties a homeowner faces if regulations are not adhered to
This information will be a window on how an HOA is managed in order to get a clearer idea of what you are joining, possible penalties and how your finances will be handled in the short- and long-term.
If a homebuyer is confident about buying in an HOA managed community, they will need to pay special attention to all the regulations, restrictions and conditions before committing to the purchase. An association can stipulate the colour a home is allowed to be painted or whether pets are allowed for example. So, make sure the contract is carefully read without missing any fine print.
De Lucia Group
At De Lucia Group, we specialise in the property management of various schemes including Homeowners' Associations. Our dedicated and specialised management team has in-depth experience assisting numerous associations with proper administration and legislative controls.
Contact us today to find out more about our tailored services.
Author: De Lucia Group