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.

Buying Property On Auction | Property Blog Articles

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to the Deeds Office, conveyancers could lodge a letter from the local authority confirming that the HOA was defunct and no longer active.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. 

Want more Snymans Articles? Sign up for our monthly newsletter.

Follow Snymans on Facebook for more legal information, tips and news about property.

Recommended for you

Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

The termination of joint ownership[post_view before=""]

The action for division of property is well established in South African law. Every co-owner of property may insist on a partition of the property at any time. This may be done even in the case where there is a perpetual joint ownership agreement.

Read More
Your bond application: A key ingredient to the property transfer
Contractual Matters

Suspensive conditions[post_view before=""]

Contracts for the sale of immovable property will very often contain suspensive conditions. One of the most common types of suspensive conditions is bond approval. 

Read More
Buying tenanted properties - don’t get caught out
Contractual Matters

Electronic signatures and the virtual commissioning of affidavits[post_view before=""]

In our June newsletter, we looked at an interesting court decision handed down in 2020 by the Eastern Cape Division of the High Court of South Africa, related to the application of electronic signatures to offers to purchase land. Last year, the electronic signing of documents once again came under the spotlight in the case of Firstrand Bank Limited v Jacques Louis Briedenhann. Interestingly, this decision was also handed down by the Eastern Cape Division of the High Court, which appears to be making groundbreaking decisions in this regard.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

The property professional’s checklist for dealmaking[post_view before=""]

The property professional plays a critical role in the process of buying and selling real estate. When ‘making the deal’, they must engage with the seller to collect information and documentation that will be needed throughout the process. At the time of taking the mandate, it is crucial that they clarify certain facts and obtain specific information and documentation in order to pre-empt any issues that may arise, thus saving time.

Read More
Buying tenanted properties - don’t get caught out
Contractual Matters

Electronic signatures and OTPs[post_view before=""]

As we live in an online world, and because of the recent pandemic, electronic signatures are becoming more commonplace – and an increasing number of buyers and sellers are asking to sign their OTPs electronically.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

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.

Buying Property On Auction | Property Blog Articles

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. 

Want more Snymans Articles? Sign up for our monthly newsletter.

Follow Snymans on Facebook for more legal information, tips and news about property.