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Buying in a gated estate? Read this

30 Jul 2014

Living in gated estates has become more and more popular over the years and buyers are often prepared to pay a premium for the privilege. However, there are some things that a prospective buyer needs to take into consideration in deciding whether to buy a freestanding home in a suburb, a sectional title unit in a complex or buying into a gated estate.

Buyers and estate agents are advised to familiarise themselves with the constitution and the rules of each HOA before they buy as they are bound to the rules laid down therein.

Karien Hunter, Founder and Director of AMC Hunter, says those buying into gated estates usually obtain full title to the land upon which the house is constructed, but there are various restrictions to such ownership, which are imposed and managed by the homeowners’ association (HOA). For example, she says plans must be approved by the HOA to ensure uniformity in architectural style before such plans are submitted to the municipality for approval, and in addition to this, there can be limitations on the vegetation that may be used in the garden such as the use of indigenous plants and trees.

An HOA operates much like a mini-municipality and provides services such as water and electricity to homeowners, which they in turn obtain from the municipality. It also controls the use of the common areas within an estate such as the roads and recreational areas, movement within the estate and security.

Hunter says all owners are obliged to become members of the HOA before taking transfer. In so doing, she says they are bound to the constitution and the estate rules of such an association, and must pay levies to cover the cost of running the estate and maintaining the infrastructure. She explains that transfer to a new owner cannot take place without the consent of the HOA, who will refuse to sign such consent where there are any unpaid levies.

“There is no legislation at present regulating the management or control of HOA’s. Each one will have a constitution and a set of rules of its own, which usually comes into effect when the first property transfer takes place from the developer”.

The constitution and rules of an association can be amended from time-to-time, and it is advisable for members to familiarise themselves with the constitution and rules, and remove any rules or provisions they find onerous or unfair. The constitution itself will determine the manner in which such amendments can take place, usually by means of a special resolution of the members of the association.

The HOA determines its own levies in accordance with its own constitution and rules, and is not subject to legislation, is not necessarily dependent on the size of the land or home constructed on such land as would be the case with sectional title.

According to Hunter, members of an HOA can also become personally liable for the debt of the HOA where the association is unable to meet its obligations; therefore, it is important to check the financial statements of the HOA before an offer to purchase is made. She says if it is a new development, it is imperative to check the financial credentials of the developer before any commitment is made.

“In contrast, buying into a sectional title complex is regulated in terms of the Sectional Titles Act. Each owner owns a section and an undivided share in the common property, which is referred to in the Act as a "Sectional Title Unit". The Sectional Title Act and the regulations thereto determine the manner in which the complex is managed.”

She says sectional title is generally more suitable for smaller developments, although one may even find sectional title developments within a larger gated estate governed by an HOA, which means such owners will have to pay body corporate levies, levies to the HOA and municipal rates.

Levies in a sectional title complex are determined in terms of the provisions of the Sectional Titles Act, which means that each owner pays a levy commensurate to the size of their unit in relation to other units. 

Hunter says buyers and estate agents are advised to familiarise themselves with the constitution and the rules of each HOA before they buy as they are bound to the rules laid down therein.

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