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HOA teeth 2 - Do HOA’s have teeth?

Do HOA’s have teeth?

By Association of Residential Communities (ARC)

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Policies, procedures, our governing documents and our rules and regulations are binding on members who choose to buy into a homeowners association or sectional title scheme. But, of course, the directors, trustees, management, and the members themselves have to ensure that these are lawful, consistent and fair, and that they protect the common interest of the community at large.

We have selected some cases that readers may find interesting in respect of judgments being handed down that will impact on the residential community industry. It is, of course, important that each of these judgments is read in the context of the application itself. While these cases are useful for reference and precedent, it should not be assumed that any future similar incidents would be decided in the same way.

Readers are also alerted to the fact that these summaries are not to be interpreted as the judgments themselves, and that they are only a synopsis of the matters. The complete judgments are available on the ARC portal.

 

Enforcing speeding rules

The first matter is the case between Mount Edgecombe Country Club Estate Two and a member pertaining to the rights of an HOA to implement its rules – in this matter specifically the rules relating to speeding.

The matter was heard in the High Court and went on appeal to the Supreme Court, where the judges ruled in favour of the HOA. The member applied for leave to appeal in the Constitutional Court, but this was denied. The ruling therefore is that an HOA does have the right to enforce rules relating to speeding, whether on public or private roads, where the agreed-upon rules and regulations have been properly and procedurally set.

Running home businesses

This matter deals with the Vanilla Street Homeowners Association and a member, heard in the Western Cape division of the High Court. The HOA, which was in this matter the appellant, is registered under the Land Use Ordinance Act. The constitution and rules stipulated that homes in the development may only be used for residential purposes, but the member of the HOA had been conducting a hair salon business on the estate for some years. In this matter the defence presented by the member was that there was a rezoning in terms of the Land Use Ordinance Act, and that the rezoning regulations had allowed her to conduct this business.

While the matter, when heard in the High Court, went in favour of the member, the Supreme Court found that the High Court had erred in its interpretation of the rezoning in the Land Use Ordinance Act. Consideration was made as to whether the constitution and rules of the HOA were more or less restrictive than the regulations in the Land Use Ordinance Act.

The judgment, therefore, was that the HOA does have the right to implement its rules in accordance with its constitution. The judges ruled in favour of the homeowners association, and that homes are to be used solely for residential purposes, so the business the member was running was not allowed to continue in order to preserve the nature and lifestyle of the estate.

 

‘Harassment’ of an HOA

This matter, heard in the Gauteng division of the High Court, was between the Silver Lakes Homeowners Association and a member. The Silver Lakes HOA was the respondent in this matter. Evidence presented by the respondent involved the constant barrage of emails received by the HOA from the member, going back several years. The HOA had made numerous attempts – all of which had failed – to request that the member refrain from the continuous, and in many cases abusive, emails.

The amount of time taken by HOA staff and management had become unacceptable and letters were sent to the member advising him that no further written communications would be received by the member from the HOA. The member continued to make demands of the HOA in respect of his rights to information as contained in the Promotion of Access to Information Act.

It was found that the applicant, in this matter the member, had failed to present a real purpose for wanting such information, and his application was dismissed.

 

Building penalties and late payment of levies

This matter, between Cilantro Homeowners Association and a member, dealt with the fact that the HOA was imposing its rules relating to the fact that the member had failed to begin and complete the building of his home on time, as well as the late payment of ordinary levies by the member. The member claimed that requests by the HOA to pay the late-building penalties were not valid. These claims, essentially, were around the fact that the HOA had not met its obligations procedurally and included the issue of whether the HOA had suffered any damages as a result of the late building by the member. Furthermore, the member also claimed several irregularities within the HOA – for example that the rules and regulations had not been registered, and that the incorrect number of directors was serving on the board, according to its governing documents.

The judgment in this matter went in favour of the homeowners association, where the judgment had included the fact that the decision to impose building penalties was valid, and the fact that the member, at the time of signing off and approving the rules and regulations, was serving as a director of the HOA.

 

Limiting the number of proxies a member may hold

This matter, between Silver Lakes Homeowners Association and a member, involved the HOA’s attempt to limit the number of proxies that a member may hold in any special or annual general meeting to five. The HOA argued that, in previous meetings, a member had held up to 150 proxies, and so in essence controlled the outcomes of that specific meeting.

The member argued that it is the right of any member to request another member to hold proxy, and that the numbers cannot be restricted in any form. The judges in this matter consulted the Companies Act, wherein it is stated that a member has the right to give a proxy to another member, and they felt that the interpretation thereof implies that an HOA cannot include in the governing documents any clauses that contradict those that are contained in the Companies Act.

The judgment in this matter went in favour of the member.

 

Rules pertaining to the choice of the paint colour of a property

In this matter, between Bush Willow Park HOA and a member, the member claimed that it was his right to paint the exterior of his home any colour he chooses, and the rules were not specific in this regard. The rules did, however, stipulate that any exterior finishes and paint colours had to be submitted to the HOA prior to the commencement of painting. The member argued that it was only after the fact that the HOA amended its rules to become more specific in relation to the rights of the member to paint the exterior of his home in specific colours.

The HOA argued that, while the previous rule was not specific in this regard, it was implied that all finishes and paint colours require the approval of the HOA before commencement.

The judgment went in favour of the HOA, and the member was instructed to repaint the exterior of his home.

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