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Levies Divide Homeowners Association Owners

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This week, a reader confronts the Property Poser panel with a rather complex issue regarding levy payments in a freehold estate.

He owns a property in such a development, which is managed by a homeowners’ association (HOA).

When the estate was developed, he says, it was decided that there would be 25 separate plots and that the levy would be shared equally among the owners.

A few owners, however, purchased double plots and built only one property per combined erf. Effectively, the estate ended up with 22 dwellings on 25 plots.

Early on, the question arose as to how the levy payable by each owner should then be calculated under these revised circumstances.

The reader says some of the double-plot owners were unhappy about paying twice the levy for essentially one house. Eventually, in an attempt to accommodate them, a complex calculation was devised for determining each person’s levy.

Although it is a less than desirable position, he says their HOA constitution states that 70 percent of the owners have to vote in favour of changing the current calculation.

To further complicate matters, a special levy was introduced a few years ago. This was paid equally by all owners, therefore the amount was simply divided by 22 and not 25.

In light of this complex situation, the reader wishes to know how the actual determination of the levies payable can be settled once and for all. He specifically wishes to know whether arbitration is a possible route to follow, thus allowing for resolution by an external party.

The first principle to keep in mind is that the HOA levy is normally paid per plot or erf, regardless of the size of the building erected on it, says Charlotte Vermaak from Chas Everitt in Port Elizabeth.

“This is different from a sectional title complex, where the levies are calculated as per the participation quota, which is based on the size of the specific unit.”

However, if the constitution states differently, Vermaak says these provisions will be binding. “To go about changing it, the provisions relating to amendment of the constitution will have to be followed.”

If the constitution makes provision for arbitration by agreement or for a party to refer the disputed matter to arbitration, then this may be a viable way to resolve the issue, says Vermaak.

According to Rian du Toit from DTS Attorneys in PE, any decision reached during arbitration will be binding on all parties, similar to a court ruling.

“An arbitration award can only be set aside or taken on review under very limited instances.”

Du Toit says typical examples would be misconduct by the arbitrator in relation to his or her duties, gross irregularity, the question of impartiality or if the arbitrator exceeds his or her powers.

“The entire arbitration process is guided by the constitution and will be subject to the terms of the arbitration clause. If the constitution does not prescribe the procedural rules of arbitration, the parties can agree to procedural rules to be followed or they can choose to follow the rules of the courts.”

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Fullstop

Full Stop Communications is a public relations consultancy in Port Elizabeth in the Eastern Cape of South Africa focusing on media relations and copywriting. We drive regional and national media campaigns in a number of fields, most notably in the property, legal and sports arenas. We also specialise in media monitoring, ghostwriting, editing, translation and advertising. See more articles by Full Stop.