What laws or rules apply to a homeowners association in South Africa? Many Homeowners Associations were registered as section 21 companies under the old Companies Act 1973. These were companies not for gain and they had a memorandum and articles of association. The memorandum set out the purpose of the company and the articles of association set out the rules for the homeowners association.
New Companies Act
On 1 May 2011 the new Companies Act 2008 came into effect. Pre-existing section 21 companies were recognized as non-profit companies under the new Companies Act. The old Memorandum and Articles of Association of a Homeowners Association was renamed to a Memorandum of Incorporation. But it is still the same old documents.
Every homeowners association must amend its founding documents
Every Homeowners Association needs to bring their old Memorandum and Articles of Association in harmony with the new Companies Act. You do this by amending the memorandum of the homeowners association. This will ensure that the rights, duties and responsibilities of home owners (members), directors and others within and in relation to the property and company are clearly set out. You will also avoid future disputes between the home owners.
Some Homeowners Associations are voluntary associations in terms of the South African common law instead of s21 companies under the old Companies Act.
There are many advantages to incorporating these entities as non-profit companies, including:
- Perpetual succession of the organisation;
- Better corporate governance procedures; and
- Increased certainty for members.