HOA Survival Manual

Home Owners’ Association Survival Manual
Author: Graham Paddock
Pages: 104
ISBN: 9780987041517
R236.00 (incl VAT and delivery)

Home owners’ associations are volunteers and residents in the community they manage. Since the single most important factor in the successful operation of a home owners’ association is the competence of its offices, the trustees or the directors who act as its executives the Home Owners’ Association Survival Manual should prove to be a welcome resource.

With the introduction of the Companies Act of 2008 the requirements for home owners’ associations formed as non-profit after 1 May 2011 came into effect. The relevant provisions of this act as well as other applicable laws and common law are neatly set out, distilled and explained in an accessible, easy to understand manner in the following eleven short chapters.

1. Understanding the home owners’ association concept
2. Member meetings
3. Documents and organisation for member meetings
4. Procedure and voting at member meetings
5. Executives
6. Executive and committee meetings
7. Executive powers, duties and responsibilities
8. Finances
9. Administration
10. Annual and occasional returns
11. Physical issues

A couple of observations about home owners’ associations might be useful to note in passing:

• The current Companies Act came into force on 1 May 2011. From this date all the existing companies established under s21 of the previous Companies Act are considered to be “non-profit companies” and to have amended their memorandum of incorporation (originally established as a memorandum of association and articles of association) to comply with the naming requirements in the current Companies Act. The acronym “NPC”, designating a non-profit company automatically replaces the previous designation “Association not for Gain” or “Limited by Guarantee” in the name of the company.
  
  While the Companies Act provides that every provision of the company’s memorandum of incorporation must be consistent with the terms of the Act and is void to the extent that it is not, this provision does not apply without qualification to pre-existing non-profit home owner association companies for a period of 2 years calculated from 1 May 2011. During this “transitional period” the members can amend the company’s memorandum of incorporation to bring it in line with the requirements of the Act.


• Home owners’ associations may provide for voting by way of electronic communication. • At all times there must be a margin of at least 10% between the highest requirement for the approval of an ordinary resolution and the lowest requirement for the approval of a special resolution.


• Section 69 of the Companies Act lists a number of classes of persons who are disqualified from being appointed and who are ineligible to act as directors.


• If an executive meeting is not convened in accordance with the governance documents, the assembly is not a valid meeting and any decisions made are not effective or binding.


• A list is given of a number of items of business and issues which should be regularly considered to give a new executive a reasonable overall impression of the operations of the home owners’ association and other important issues such as budgeting for the following financial year.
• If proper minutes of a meeting are kept then it is up to the person wanting to prove the meeting invalid to prove as much and not the Home owners’ association to prove the opposite.


• Good physical, administrative and financial management will generally ensure that the best interests of the Home owners’ association will be looked after.


• The executive’s personal financial interests in the Home owners’ association must be considered in terms of s 75 of the Act.


• There are circumstances in which a trustee or a director can become personally liable, but generally not, especially when they make it quite clear that they are acting in a representative capacity and they get independent and professional advice.


• The constitutions of all common law home owners’ association s must require the keeping of all accounting records. As must companies.


• The fundamental purpose of a home owners’ association’s financial statements is to deliver comprehensive and intelligible financial information based on its financial records. • Financial statements must not be false, misleading or incomplete in any material way.


• Can home owners in arrears with their levies claim statutory protection from the home owners’ association in its recovery process under the National Credit Act?
  
  The courts have held that an invoice for sectional title levies and interest thereon, was not an “account tendered for goods and services provided” and therefore did not fall within the ambit of the National Credit Act. The same principle applies to home owners’ association levies.


• Any person other than a direct employee of the home owners’ association who chases and collects outstanding levies or any other amounts due by owners to the home owners’ association must register as a debt collector under this statute and failure to do so is an offence.


• There is no statutory control over the names of common law home owners’ associations.


• Proper records have to be kept and perhaps other lists, documents, plans and suchlike over and above the statutory requirements.


• Since common law home owners’ associations don’t operate under any statutory supervision, unless their constitutions make some special provision in this regard, they are not obliged to render any form of annual return. Non-profit home owners’ association companies however must render an annual return to the Commission.


• Regular inspections of plant, facilities and other areas of communal property should be carried out to ascertain their condition and detect problems at a relatively early stage when their repair is likely to be less expensive.

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