PROPERTY NEWS - Dr Dennis Farrell, chairman of the George Business Chamber, gives his take on what to look out for when buying property in a cluster housing development.
George has been experiencing growth within the residential property market over the past few years, which has resulted in a boom with regard to new residential developments. A large portion of these developments are security type "estates" and "gap" housing development.
An investment into a new home, whether it is in an estate, housing scheme or otherwise, remains a substantial investment for almost everyone. There are however a few important aspects to be aware of when one buys into an estate which is governed by a homeowners association, sectional title body corporate and/or life rights association.
It is safe to say that very few buyers read the documents governing the estate before they actually buy. Most people rely on trust and their emotions when they buy. The fact that a Community Scheme Ombud Service (CSOS) was established to facilitate disputes within "community schemes" show the impact of people being ignorant of the implications of living within an estate.
The rules and regulations laid out by a homeowners association (HOA) or body corporate (BC) can address numerous aspects such as the colour that a homeowner can paint their home or whether pets are allowed on the premises. The stipulations can be restrictive, which is why those who want to buy a home within a community that is governed by an HOA/ BC should ensure that the regulations don't conflict with their lifestyle. Choose the estate that's going to give you the lifestyle you're looking for, with all the amenities and the extras that come with it, but understand what you're signing, understand what you're buying into, because once you buy in, you've agreed to accept all the rules that the estate has in place.
Freedom to change layout
It is also important to note that when an estate is still in the process of being developed, a prospective buyer needs to ascertain the freedom the developer may have to change the layout of the scheme. This to ensure that the lifestyle the buyer may think to have bought into can change in future as the "face" of the scheme can change.
It is therefore imperative that a prospective buyer reads through all the documentation that has bearing on the scheme, including the constitution and related documents.
Do not neglect any aspect of the document and read all regulations, restrictions and conditions before committing to buying the home. It will take some time to read the documentation in its entirety, but it is better to do it beforehand than move in and find out that you are unable to park a second car outside the property or store a caravan in the garden. Rather know up front, than be caught unawares with little recourse.
Rules and regulations
First and foremost, take note of the rules and regulations of the scheme. Herewith it is referred to as the Constitution and Rules and Regulations. That is what every resident and developer must abide to. There are various rules such as normal housekeeping and building guidelines which would have been agreed with the local authorities in terms of the zoning and infrastructure required. These cannot just be changed by the trustees or developer - there is a laid-down procedure to do this.
You should be aware of it and might find it in your interest to enquire about the following:
- The pre-approval conditions for the development by the relevant authorities. This would give you an indication of what the accountabilities are of specifically the developer (if still applicable).
- The record of decision (ROD). This would reflect the decision made by the authorities, which stemmed from the pre-approval conditions indicated above and the agreement between the developer and the local authorities.
- Environmental impact assessment which contains conditions stipulated by the department of Environmental Affairs regarding the development.
All of the above would become the accountability of an elected leadership, the trustees or directors who are nominated and chosen by the members (property owners) within the development.
It is important to note that as a member in the estate you are entitled to all information pertaining to the affairs of the estate - this includes the minutes of meetings and the financial statements, both annually and monthly/quarterly. As a buyer into an estate, make sure you are aware of the current solvent and operational running status of the estate.
Quality of leadership
As when investing into any business, whether a start-up or a public listed organisation, one should first look at the quality of the leadership, e.g. owners, directors, board and general management. Should you have confidence in their ability to run and improve the returns in the business by operating within the legal and governance framework, you would invest.
The same principle should be followed when investing in an estate. The trustees need to be people who fulfil their fiduciary duties, don't make decisions that are in conflict of interest and must manage the estate within the governance rules set out above. Hence it becomes very critical for trustees to, at their election, declare their interests in any aspect of the operations or development of the estate. The constitution should also provide governance on how to vote on matters where there is potential direct conflict of interest by members and/or trustees.
It must be said that the key stakeholders other than the members in an estate would include the local authorities, and all service providers inclusive of the developer. However, when it comes to the leadership and management of an estate, it must be left to the trustees or directors who are competent in leadership and management.
Being a developer or nominated member should not automatically entitle you to be a trustee as the competencies required in leading and managing an estate requires specific competencies within a structured governance framework.
So, when things seem to be going wrong within an estate, who can you turn to, who are the gatekeepers for the members?
- Firstly, follow the dispute resolution process as per the constitution of the scheme / estate as the trustees should be able to assist you.
- The CSOS is there for you to view your application and they will act on your behalf.
- The local authority as well as the department of environmental affairs will be there to assist you regarding your concerns.
Anyone buying into any estate should make sure that they do an in-depth due diligence into the leadership and management, the management agent and the developer. Investigate websites with related documentation, speak to people living there and if in doubt, contact the local authorities.
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