Decision making in HOAs

A homeowners' association (HOA), whether it be a small residential complex or a golf estate, is a community scheme and its members are entitled to a say in how it is run. How is this achieved?

As in all democracies, it is not practicable to gather together all the members of an HOA whenever a decision needs to be made. Therefore, executives are elected or appointed and it is these executives who make the day to day decisions required to manage the association's affairs. HOAs usually hold an annual general meeting where the members are given the opportunity to exercise their rights to speak, be heard and to vote on policy decisions. One of the decisions taken at the AGM is the election or appointment of the executives. In this way, an individual member is able to influence the day to day management of the community in which s/he lives.

The Companies Act provides for two levels of policy decision making by members of non-profit HOA companies, ordinary resolutions of members in general meeting and special resolutions. Special resolutions require a higher level of consensus to pass than do ordinary resolutions.

The constitution of a common law HOA must detail the voting procedures used at general meetings of members. Most constitutions provide for a second level of consensus which parallels the special resolution of a company but not all do. Votes may also be weighted, as is also possible in non-profit company HOAs.

It is not unusual for the governance documentation of both types of HOA to provide that the members in general meeting may restrict or direct the activities of their executives. The most common example of this type of restriction is to limit the amount of money that the executives may spend on a single item without consulting the members.

Anton Kelly is the Course Convener of the Paddocks Home Owners' Association Management course. The next course starts 21 February 2011. For more information about Paddocks or the HOA Management course please contact Kate: kate@paddocks.co.za or see www.paddocks.co.za.