Jeff Gilmour, President of the Association of Residential Communities (ARC), clarifies the rules and codes of conduct applicable to estates.
WATCH:Body Corporate Rules
Q: Who ultimately, and at the very start, determines an estate's rules, code of conduct etc., and at what point does this move over to residential management?
When the development is launched in the first place, it is generally the developer who will issue the ‘first’ set of rules, codes of conduct etc. At some point during the building process, the developer may then invite resident members onto the board while the developer still retains control. It is at this point where, perhaps, certain rules are amended, which again are amended once owners take occupation. These rules are amended, distributed, and ratified by the newly-appointed HOA members at an annual general meeting.
Q: How are Home Owner's Associations (HOAs) formed, and by who?
Homeowners Associations are generally created in two ways: Firstly, they may be formed by a developer who buys land and creates a development for which a homeowners association will be the body that governs the community; or secondly, where the municipality owns the land, and the municipality allows developers to build on its land, for which it would need a constitution rather than a memorandum of incorporation.
Q: What are the roles within HOA’s?
The chairman of a HOA in a development that is registered as a non-profit company (NPC), or the chairman of the trustees in the case of a sectional title scheme, will lead the board, which will include presenting board reports at annual general meetings and special general meetings for the passing of resolutions.
There should also be a finance director who is responsible for the financial affairs of the HOA or the sectional title scheme and is required to sign off the budgets, the income and expense statements, and any other financial records that the HOA Body Corporate keeps. These boards may also elect board members to perform other roles specific to a task, such as security, landscaping, communications, compliance, events, and newsletters.
Q: Are HOA rules and codes of conduct different vehicles? If so, how?
This depends on how each of those terms are defined. There are many communities that refer to their rules as a code of conduct, while others refer to the rules as ‘rules’ but may also include a code of conduct. There may also be a code of conduct for management and a code of conduct for any committees that may be in place. The most common approach is to have rules and separate codes of conduct for the other parties, as mentioned.
Q: What are the legal requirements, if any, governing HOA's?
A: The HOA NPC is governed by the Companies Act. While the Company Act does not govern the HOA common law, it is covered under the same laws as it relates to common laws sectional title schemes, which the Sectional Title Schemes Management Act governs.
Q: Can rules be challenged, and if so, by whom?
Yes, rules can be challenged and should this occur, it is up to the individual/resident to consult with the board. Where the board agrees that a law should be amended, it needs to be ratified at the next annual general meeting. If not ratified, the ruling falls away, and the old rule remains active.
It is important to remember that should such a situation result in a dispute, a dispute resolution procedure of the board of directors or board of trustees needs to be implemented.
Q: How should disputes between neighbours be handled, and by whom?
In the first instance, owners should attempt to resolve the matter internally with the board or the estate management team. Most estates have a written dispute handling mechanism. However, should a matter not be resolved, a party may approach the community scheme's Ombud service that would mediate discussions to find solutions and provide orders to rectify the situation.
Q: Are there specific legal requirements that must be included in these rules/codes?
Only where a rule may breach any provision in another set of legislation, for example, local laws may prohibit the keeping of chickens, which means regardless of the wishes of residents, chickens are not acceptable on the property.
Q: What role should estate agents be playing relative to the rules?
When putting together the offer to purchase between the buyer and the seller, estate agents must ensure that the buyer is informed and provided with the rules/code of conduct that pertains to that particular community. They must also ensure that the relevant party agrees to abide by the rules by signing those. Thereafter the agent or the new owner presents those with other applicable documentation to the HOA office.
Many communities run programmes for estate managers and other interested stakeholders to ensure they are in possession of the most updated rules and regulations. It is therefore a good idea for estate agents, who work in a particular area, to develop a good relationship with the local HOAs of estates.
Writer: Kerry Dimmer
