Estate Living Digital Publication Issue 3 March 2015 | Page 58

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ASSOCIATION OF RESIDENTIAL COMMUNITIES

Home owner’s associations sigh with relief
Home Owners’ Associations (HOA) across
South Africa are breathing a welcome sigh
of relief, having secured a major victory
that strengthens their position when
securing outstanding debts.
In a judgment delivered on 14 December
2014 by the Supreme Court of Appeal,
it was confirmed that registered title
conditions, which prohibit the transfer
of residential property without a
clearance certificate or the consent of the
relevant HOA, are, in fact, enforceable in
insolvency situations where the effect of
such conditions is for the HOA to be paid
prior to any other secured creditors.
The important judgment was as a result
of two cases – Willow Waters Home
Owners’ Association versus Jerry Sekete
Koka & others, and Monica Gezina Cowin
versus the Kyalami Estate Homeowners’
Association, both of which concerned
the enforceability of the title conditions in
question upon insolvency.
The Association of Residential
Communities (ARC) and National
Association of Managing Agents (NAMA)
participated in both the above matters as
amici curiae or friends of the court, with a
view to advancing the collective interests
of all home owners’ associations across
the country. Prior to this, the majority of
HOAs had no other means of securing
outstanding levies owed to them other
than through the enforcement of the title
conditions in question.
Andrew Molver, a partner of law firm
Adams & Adams and who represented
ARC and NAMA in both matters,
commented that: “These decisions will
benefit all home owners’ associations on

a national level, from those with only a
few members where the non-recovery of
any levies would have a substantial impact
on individual owners, to larger residential
estates where the ability of home owners’
associations to secure payment of levies is
central to their ability to provide ongoing
services on a macro level.”
Facilitated by the amici curiae, the matter
was ultimately decided on the strength
of the argument that the registration of
the conditions in question creates real
rights that are binding on the Master of
the High Court as well as the trustees of
the insolvent estate. As a consequence,
the trustees are obligated to satisfy the
conditions required for the relevant
home owners’ association to issue a
clearance certificate prior to the transfer
of the property being possible, and this
is irrespective of the rights that secured
creditors hold in terms of the Insolvency
Act.

owners and subtract from the bundle of
ownership rights ordinarily enjoyed by
any property owner.ARC and NAMA also
argued that it would be unconstitutional
not to enforce the title conditions in
question, as doing so would amount to
an arbitrary deprivation of property. In
this case, the property would consist of
the relevant HOA’s right in relation to the
property, to veto its transfer prior to the
satisfaction of all obligations owed to it,
and the issuing of the related clearance
certificate. The court commented that,
while it was not necessary to decide the
constitutional question, on account of the
matter having been decided by the courts
finding that the rights in question are of a
real nature, there could well be merit to
that argument.

The judgments now place HOAs on an
equal footing with municipalities and
bodies corporates that recover rates,
taxes and levies by virtue of the provisions
of Section 118(2) of the Municipal
The court agreed with Willow Waters Systems Act and Section 15(B)(3)(a)(i)(aa)
Home Owners’ Association and the amici of the Sectional Ti \