Freehold vs Sectional Title and Body Corporate vs HOA's explained

Private Property South Africa
Kerry Dimmer

A freehold property within an estate is not subject to the same ownership, regulations and rules as a sectional title. Let’s look at the differences:

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There is however a grey area; when a freehold property is part of an estate, and therefore no Body Corporate is required. In a case such as this, home owners are encouraged to form a Home Owners Association (HOA), which is a non-profit organisation.

See more: Parking in a sectional title

HOA’s have becoming increasingly more popular. Essentially they serve a community of individual properties that while may be exclusively owned by members, as in freehold circumstances, they share common infrastructure such as roads, security services, reception areas, recreational facilities etc.

Whilst this does sound similar to Sectional Title ownership, Andrew Smith, Director of Denoon Sampson Ndlovu Inc, a law firm specialising in conveyancing and property development, explains the role of HOA’s.

One normally finds a HOA has been created for a residential estate where the owners of the properties have a common goal of sharing the cost of security and costs of maintaining pavements and roads within an estate.

“Sometimes however, the goals of the HOA are a lot more specific. For example, the rules may cover regulating architectural styles, the control of paint colours for the exteriors, and the gardens may be required to only have indigenous plants. These goals are to create a generally harmonious feel within the estate and to maintain standards to ensure that the property investments retain their high value.”

Smith does agree that the needs of residents within an estate hosted by an HOA are similar to those of one with a Body Corporate under Sectional Title schemes but he emphasises that as there is no legislation to force the creation of HOA’s, developers of such estates, sometimes even the owners themselves, determine that an HOA will better serve their needs.

“A HOA will have a Constitution, or Articles of Association, which determine the structure of the entity: how meetings are run and how Rules are created,” says Smith. “These are much like the Rules of a Sectional Title Scheme but are slightly different.

“HOA Rules can be compared to Conduct Rules, and are agreed to by the members. These can be strict or lenient, depending on the needs of the community. The Rules tend to be a lot less stringent than those created for a Sectional Title scheme because the homes are generally further apart, and the owners are not jointly responsible for the maintenance of their homes. Instead they are only responsible only for the maintenance of their own home.”

As in any society or organisation rules exist to ensure stability, and in the case of contravention, fines apply, be those relative to Body Corporates or HOA’s. Smith explains however, that fines imposed by the trustees of an HOA are “a lot less frequent that one would have with a Sectional Title Scheme where residents live almost on top of one another.”

Where fines, and levies, are not paid, be those imposed by Body Corporate’s or HOA’s, appropriate court action may be imposed. It is therefore crucial to understand the Rules of the estate in which you live or intend to live. Best yet it is in each owner’s best interests to be appointed to these governing bodies for at least one term, to fully understand the impacts of estate Rules, the legislation behind them, and to represent that your vision for your investment is maintained to the highest possible standards.

Read more: Are your body corporate rules reasonable?

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