DEVELOPERS LIABILITY TO CONTRIBUTE TO THE LEVY FUND
OF A HOME OWNERS ASSOCIATION

TO ALL EXTENDED BUSINESS PARTNERS

Number

16/2016
The developer's liability to contribute to the levy fund will depend on the wording of the constitution of the Home Owners Association.  In the case of Tre Donne Home Owners Association and Another v Bergwater Plase CC (A476/14[2016] ZAWCHC69 dated 9 June 2016 (case attached for ease of reference) this matter was once again placed in the spot light.
 
Developers in homeowners' association developments are often, by way of special conditions in the association's constitution, exempted from paying levies in respect of unsold properties still owned by the developer.  The rationale is that the developer is usually liable for the expenses of providing services, roads and infrastructure during the development period and should not be burdened with levies in respect of its unsold erven in that period.
 
The court in the aforesaid case held that the Home Owners Association did not have the authority or entitlements to remove clauses entrenched in the Constitution of the Home Owners Association, unilaterally, as the action to do so is ultra vires.
 
Conclusion
 
It is important to remember that members of the HOA are the registered owners of properties in the estate who voluntarily bind themselves to the rules of the constitution when acquiring ownership in the estate.  The constitution in its original form is a contract between the members which can only be amended in terms of that same contract.
 
The above case must not be interpreted as authority that all developers are not liable to contribute to the levy fund of a HOA.  In the case of Heritage Hill Home Owners Association v Heritage Hill Devco (Pty) Ltd 2013 JDR 0399 (GNP) it was held that the Developer is liable for levies on all untransferred erven.  It is thus necessary for any prospective purchaser, when buying property which is subject to a HOA, to thoroughly peruse the constitution of the HOA and possibly seek legal advice if something is unclear or ambiguous

 
For any queries please contact our property law division at the details below:

Allen West
Tel: 012 425 3549
awest@macrobert.co.za

Daleen Loubser
Tel: 012 425 3489
dloubser@macrobert.co.za

Disclaimer: This newsflash is for general information only and should not be used as legal or professional advice. No liability can be accepted for any errors or omissions, nor for any loss or damage arising from reliance and any information therein