In two recent cases decided in the Supreme Court of Appeal
(SCA), namely, Willow Waters Homeowners Association (Pty)
Limited v KOKA NO and others  JOL 32760 (SCA) and Cowin
NO v Kyalami Estate Homeowners Association (499/2013)  ZASCA
221, the SCA was asked to consider:
whether registered title conditions which prohibit the transfer
of residential property without a clearance certificate or consent
from the relevant home owners' association (HOA) amount to real
rights (ie enforceable against all third parties) or personal
rights (ie enforceable against only the landowner); and
whether such title deed conditions are binding on
In both cases the landowners (one being a company, the other
being a private individual) failed to make the regular levies
payments charged by the HOA and were later declared insolvent. In
both instances, the landowners had bonded their properties to
financial institutions, which financial institutions had in turn
obtained judgments against the insolvents and sought to limit their
losses through sales in execution of the properties. Upon
conclusion of the individual sale of property agreements with third
parties, the liquidators approached the respective HOAs for a
clearance certificate, for purposes of giving effect to transfer.
The HOAs refused to provide such certificates until such time as
the arrear levies were settled.
In arriving at its conclusion, the SCA considered the two
questions posed above and held that ownership consists of a bundle
of rights and competencies which includes the right to use and
dispose of the property. The restrictive title deed conditions
however took away from the owner's dominium by restricting the
right to dispose of the property freely, thus subtracting from the
dominium of the land. Furthermore, the court held that, given that
the ownership of the property was subject to landowners agreeing to
the HOA rules, and the creation of the restrictive title deed
conditions, there was a clear intent for the restrictive conditions
to be binding on all.
The court further dismissed the argument proposed by the
liquidators that the stance adopted by the HOA to not issue a
clearance certificate prejudiced the balance of the creditors,
particularly the rights of the bondholders, who were secured
creditors. The SCA reasoned that sequestration may not be ordered
unless it is shown to be advantageous to the creditors. Given that
the role of the HOA is similar to those of municipalities in terms
of the Local Government: Municipal Systems Act, No 32 of 2000 or a
body corporate in terms of section 15B(3)(a)(i)(aa) of the
Sectional Titles Act, No 95 of 1986, the court held that there is
'no basis' to deprive the HOA from the protection afforded
to municipalities and body corporates.
Apart from providing certainty in respect of the rights of the
HOA, the above cases have wide reaching consequences which are
HOAs now enjoy the same level of protection afforded to
municipalities and body corporates in respect of outstanding debts
and may withhold clearance certificates until such time that the
arrear levies have been paid;
Liquidators are bound by the restrictive conditions imposed for
the benefit of HOAs and will have to factor in these costs when
negotiating the sale of immovable property in an insolvent estate;
Bondholders should be mindful of the rights of HOAs when
seeking an order for the sale in execution of properties.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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As a developing country, Nigeria's real estate sector is evolving at a tremendous pace. Governments at all levels are more aware of the role of real estate development on the growth of their respective territories.
In principle, when the parties agree to arbitrate, they shall be
bound by that agreement. It should therefore follow that when a
party initiates arbitration proceedings, the other party - the
respondent – will avail itself of the opportunity to present
its case and participate in the proceedings.
Many standard form contracts contain provisions limiting the overall liability of the contractor, upon which a contractor unfamiliar with UAE law may place mistaken reliance.
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