How Is a Home Owner’s Association Protected When an Owner Sells Their Property?

Disputes often arise in Home Owner’s Associations (HOA’s)/Estates across South Africa between the Directors of the Homeowner’s Association and Sellers and Purchasers of property in the Estate.  

When assessing such disputes, one must look into the legal rights and obligations of the HOA and of the Seller and the Purchaser.

Most often, the sources of these rights and obligations are contained in the Memorandum of Incorporation (MOI) of the HOA, the Sale Agreement between the Seller and Purchaser, and the Title Deed of the property.

In this article, we will make use of the terms HOA and Estate interchangeably.

The Primary Source of Protection for the Estate – The Memorandum of Incorporation

The MOI must state that an Owner cannot transfer a property to a Purchaser unless the Purchaser has:

• Bound themselves to the satisfaction of the HOA to become a member of the HOA
• Agreed to be bound the HOA’s governance documentation

It is preferable if the MOI also states that the Owner will ensure that the above requirements of the MOI:

• Will be contained in the Sale Agreement with the Purchaser
• Will be carried through/reflected, as conditions in the Title Deed

The MOI must lastly state that the Owner will only be entitled to transfer the property to the Purchaser, on the HOA providing a clearance certificate to the Conveyancer stating that the provisions of the MOI have been complied with.

The Secondary Source of Protection for the Home Owner’s Association – The Sale Agreement

The Agreement of Sale of the property between the Owner and the Purchaser should preferably record that:

• The Purchaser agrees to bind himself to the satisfaction of the HOA to become a member of the HOA

• The Purchaser agrees to be bound by the HOA’s governance documentation
• The above terms will be recorded as conditions in the Title Deed
• Transfer of the property will only proceed on the production of a clearance certificate from the HOA stating that the MOI has been complied with.

At the very least and what many Agreements of Sale provide for, in substitution of the above provisions, is that the Seller and Purchaser undertake to sign all such documents as may be required to give effect to the terms of the Agreement of Sale.

The Third Source of Protection – The Title Deed of the Property

The Title Deed of the Property must contain conditions that:

• Every Owner will become and remain a member of the HOA
• Every Owner will be bound by the HOA’s governance documentation 
• The property cannot be transferred to a person who has not bound themselves to the satisfaction of the HOA to become a member of the HOA 
• Every Owner will only be entitled to transfer the property on the production of a clearance certificate from the HOA stating that the provisions of the MOI have been complied with

Other Important Facts To Consider

If the above conditions are contained in the Title Deed of the property, the Seller will only be able to pass transfer to the Purchaser on production to the Deeds Office of the HOA’s clearance certificate.

The Deeds Office will compare the conditions in the Title Deed with the HOA’s clearance certificate and only register transfer of the property if the certificate confirms the conditions of the Title Deed and will otherwise reject the transfer.

HOA’s are advised to check that the provisions above appear in the Title Deeds of all the properties in the HOA.  

If the conditions do not appear, the Deeds Office will not require a clearance certificate from the HOA but only a Conveyancers certificate stating that the HOA has received all monies due from the Seller in respect of the property.

Where to From Here for Home Owners Associations

HOA’s whose MOI contains the above provisions and whose Title Deeds contain the above provisions have little to do.

HOA’s whose MOI and/or Title Deeds do not contain these provisions and conditions should see to the amending of their MOI and the inclusion in the Title Deeds of these conditions.

Alan Levy Attorneys Notaries & Conveyancers: Experts in Property Law and Conveyancing 

Alan Levy Attorneys offer expert property law advice and legal guidance in line with South African legislation to:

• Landlords and Tenants on landlord/tenant law 
• Seller and Purchasers of property 
• Community Schemes like HOA’s and Sectional Title Schemes

This article is a summary only and does not constitute legal advice. 

For legal advice, please contact Alan Levy Attorneys