When is an HOA established?

For those of us that work in the community schemes industry, we know that a body corporate is established as from the date that the first transfer of a unit from the developer to a third party has been registered, and that the first general meeting of the members of the body corporate must take place within 60 days of this date. When is an HOA considered to be established and when do its members meet and take over the administration and management of the association?

For the purpose of this article, let us look at HOA's approved in terms of the Common Law, and not those registered as NPC's under the Companies Act. In an HOA, a buyer must be provided with a copy of the constitution, as lodged with and approved by the Local Authority, namely the Department of Planning and Building Development Management. This department sometimes, but not always, reviews the contents of constitutions submitted. However, the formalites regulating such formation is much stricter of late, and a checklist of requirements exist and require compliance with in order for a developer, or their appointed conveyancer, to lodge a constitution.

The buyer must receive, read and understand, the constitution so provided, and is bound to same as from the date of transfer. However, this does not mean that the HOA is established at this stage. In this regard, a constitution of an HOA may provide that the association is only formed, and the first meeting of members will only be held after a certain period of time has lapsed, alternatively a certain number or percentage of erven have been sold and transferred, or when the developer so decides.

In our HOA, our constitution provides that there will be no association, no meetings, no trustees, and that all decisions will be taken by the developer, until such time as 60% of all the erven in the entire phased development has been sold and transferred from the developer to third parties, and we're in our 6th year of ownership and there is still many phases to be built. The members, who did not read the constitution, or did not understand it, often question when the first general general meeting will be held, and when they, as members will be able to make decisions, including the appointment of trustees, hiring and firing of contractors and the like.

As a result of the sometimes long duration of time that must sometimes pass before an HOA is established, some members may take it upon themselves to form informal committees or have communication groups to engage in matters common to all, sometimes working themselves up to a frenzy of impatience and resentment towards the developer, but such is life in an HOA sometimes, hence the age old maxim, "buyer beware".

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