Author: STONEWOOD PROPERTY MANAGEMENT
10 July 2020
HOW HOMEOWNERS’ ASSOCIATIONS [HOAS] ARE DIFFERENT FROM SECTIONAL TITLE SCHEMES
Homeowners’ associations (HOAs) and sectional title schemes are referred to as community schemes. There are many differences between these types of schemes. We mainly focus on the laws that govern these two types of schemes and how to amend their rules.
The laws that govern HOA
Homeowners’ associations (HOAs) can either be subject to a constitution (in the case of a common law association) or memorandum of incorporation (MOI) in the case of a non-profit association. In contrast, sectional title living is subject to the Sectional Titles Act (STA) or the Sectional Titles Schemes Management Act (STSMA).
Initially, community scheme rules are drawn up by the developer of the scheme. Sectional title rules are prescribed by the Sectional Titles Schemes Management Act (STSMA) and the developer can amend or add to these rules before registering the scheme.
With an HOA, the developer is not guided by any prescribed rules, meaning that the rules have to be drawn up from scratch based on the requirements of each individual development. To start off, the developer needs to include standard rules such as when general meetings will be held, how many owners must serve on the management committee of the scheme and how voting when making decisions in the scheme will take place.
Changing the rules
Once a development is registered and the buyers have taken ownership via transfer, the rules can be changed by the members of the scheme. Changing the rules require consultation and approvals from the scheme members in order to be valid.
Sectional title schemes have management and conduct rules which can only be changed at a special general meeting of owners. To make changes to management rules, a quorum of 80% is required (in person or by proxy) and 100% of the attendees must vote in favour of the proposed changes. Changes to conduct rules require a quorum of 33,33% and 75% of the registered attendees must vote for the proposed changes.
Changing rules for a HOA is less cumbersome as it only requires a majority approval at a members’ meeting. The constitution or MOI of the association will stipulate the voting requirements to amend the rules.
Once the members in the association have approved the amendments to the rules, the amended constitution or MOI must be submitted to the local municipality for record keeping purposes.
Estate living and living in a sectional title scheme share many of the same principles, such as shared costs and the use of common property, to name a few.
The STSMA is there to guide trustees and managing agents with the management of a sectional title scheme, whereas an HOA has a constitution or memorandum of incorporation to provide guidance. Incorporated in these legal documents are rules that members must comply with.
Owners in sectional title schemes are compelled by law to comply with the rules of a scheme whereas members in a HOA are contractually obligated to comply with the rules of the association. Either way, both types of developments have rules to assist with the management of these schemes and provide guidance for owners on how to conduct themselves.
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