Owners in sectional titles schemes don’t always realise that, as a group, they can tell the trustees how to deal with a specific issue. Both the Act and the prescribed rules make that provision. Do owners in a home owners’ association enjoy the same prerogative?
In HOAs that are common law associations, the constitution often provides for the owners to make rules at the AGM. The intention, of course, is that the owners make rules about behaviour, use of the communal facilities, and so on.
The day-to-day management of community schemes is almost always the responsibility of elected executives. In larger schemes, the executives commonly employ a managing agent to perform most of their functions, but the proper execution of those functions always remains the ultimate responsibility of the executives. What happens, though, when owners in the scheme have an opinion about how a certain matter should be dealt with, and that opinion differs from that of the executives? Can owners tell the executive committee how to deal with that matter, or do they just have to accept what the committee decides?
In sectional title schemes, the functions and powers of the body corporate are performed by trustees, subject to directives or restrictions by the body corporate in general meeting. And that means by simple majority of owners at a meeting. The situation is not usually the same in home owners’ associations (HOAs), but the members can make it so.
In HOAs that are common law associations, the constitution often provides for the owners to make rules at the AGM. The intention, of course, is that the owners make rules about behaviour, use of the communal facilities, and so on. But these rules aren’t supposed to tell the trustees how to run the scheme. Any well-drafted constitution also sets out how its terms can be changed, and this provides the opportunity for the members to introduce provisions, similar to those in sectional title legislation, that allow them to tell their trustees how they want a certain matter dealt with. It might also be necessary, however, to change some other parts of the constitution that provide the basis for the trustees’ authority.
In HOAs that are non-profit companies, the situation is similar. The Companies Act provides for the memorandum of incorporation (MOI) to be changed. It also provides for the authority of the board of directors to be limited by provisions in the company’s MOI. Such a change to the company’s MOI - like any other - can be called for by members holding only ten percent of the voting rights; although their approval does require a special resolution, which is a 75% majority.
Of course, the governance documentation of both types of HOA could restrict members’ ability to make changes, especially changes that restrict the executives’ powers to run the association. That might be appropriate for certain types of association, but is it appropriate in associations that provide a community structure for people’s homes and families? - Anton Kelly
The next Paddocks Home Owners' Association Management course starts on 11 February 2013. For more information, contact Emma on 021 447 4130 or via email.