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Before purchasing a home in any community housing scheme that is governed by a Homeowners’ Association (HOA), prospective buyers must make sure they understand all the rules and regulations as well as the financial implications of their decision.
“They may be excited at the prospect of moving into an estate or a cluster complex and having better security, more amenities close to home and fewer maintenance concerns. But there is some essential information they should obtain first to make sure the development can and will live up to their expectations,” says Andrew Schaefer, MD of leading property management company Trafalgar, which provides services to many HOAs around South Africa.
Firstly, he says, prospective buyers should ask for a copy of the founding document of the HOA, which will be a constitution if the HOA has been established as a voluntary association, or a Memorandum of Incorporation (MOI) if it has been established as a non-profit company. This should not only set out the duties and responsibilities of the HOA directors and voting and quorums for meetings, but also the conduct rules for the complex.
“Issues to consider here include what maintenance and repair tasks are the responsibility of the HOA, such as the upkeep of communal roadways, gardens and security buildings and equipment, and which are expected to be undertaken by the individual homeowners.”
“This will also give prospective buyers the opportunity to find out exactly what amenities the development offers – and whether these have all already been built or are still in the planning phase. Swimming pools, gyms, tennis courts, community centres, clubhouses, restaurants, walking trails, or wellness centres could all be included under this heading, and it’s important to know whether there are any restrictions or additional fees associated with their use.”
And speaking of fees, Schaefer says it is vital to establish what the monthly HOA levy is, whether it is affordable and what it covers, bearing in mind that homeowners in freehold estates and clusters also have to pay their own property taxes, municipal service bills and insurance premiums.
“At the same time, it would be prudent to review the HOA’s financial statements, budget and any reserve fund to ensure that it is well-managed and can cover its expected expenses without significant levy increases. Such expenses should include adequate insurance coverage for common areas and shared amenities as well as public liability if someone should get hurt on the property and blame the HOA.”
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He says prospective buyers also need to know how the HOA usually operates and how much say they are likely to have in important decisions affecting their community. “And although it may be more difficult to find out, they should enquire whether there are any current conflicts or disputes between homeowners or with the HOA that could create a negative atmosphere or prevent owners from living in harmony with their neighbours. Reviewing a copy of the last AGM minutes would be a good place to start in this regard.
“Then lastly, if they are planning to buy into an established estate, they should ask if there are any plans for further development and large-scale construction work in the future, and evaluate how this might affect their living environment, property value, and security.”
