Defunct Homeowners Associations and Consents to Transfer

Title deeds of cluster developments commonly contain a condition which states that alienation or transfer of a property by the owner is not allowed unless consent from the Homeowners Association (HOA) is provided. Usually inserted by the relevant local authority when approving the cluster development, this type of condition also confirms that all subsequent owners of the property automatically become members of the HOA.

July 28, 2021

Problems arise, however, when an HOA becomes defunct. HOAs are juristic bodies, which means that authorised individuals need to act on their behalf. Should an HOA become defunct, it means there are no individuals to properly act on its behalf – and as a result, there is no one to confirm that the HOA consents to a transfer.

Previously, the solution was simple: instead of providing the necessary consent to the Deeds Office, conveyancers could lodge a letter from the local authority confirming that the HOA was defunct and no longer active. This changed, however, with the introduction of the Registrar Conference Resolution 4 of 2018.

The resolution confirmed that in instances where consent is required from a defunct HOA, either a court order must be obtained which confirms that transfer can occur without the necessary consent or the procedure set out in the relevant municipal planning by-law must be followed.

It’s worth bearing in mind that obtaining a court order can be a long and expensive process. In this instance, all members of the defunct HOA must form part of the court application together with the relevant bond holders.

On the other hand, following the procedure set out in the local land planning by-law can also be a time-consuming process for the owner, as typically consent must be obtained from a number of owners in the cluster development.

It’s clear that defunct HOAs may cause delays in transfers. And it’s therefore advisable that should an HOA become defunct, the members re-establish it and appoint a member or members as trustees to assist with the signing of the consents required in terms of the title deed. In this instance, the assistance of an attorney or auditor may be needed to record or rectify any omissions or errors at the Companies and Intellectual Property Commission.

Written by Wessel de Kock

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