Warning for complexes, estates and gated communities in South Africa

 ·25 May 2024

Real Estate Business Owners of South Africa (Rebosa) have highlighted that HOA profit-making practices are an ongoing concern in South Africa – a major problem for both homeowners and estate agents.

Rebosa flagged in February that some Homeowners Associations (HOAs) – responsible for managing such communities – are also involved in unlawful profit-making practices that could negatively affect the sale of a home and the agents tasked with the sale in estates or gated communities.

Rebosa CEO Jan le Roux noted that he was made aware of several cases where the seller’s Rates Clearance Certificate (RCC) was withheld until the agent involved paid the HOA an ‘agreement’ fee—holding up the seller’s transaction to the benefit of the estate.

Le Roux said these fees range from R5,000 per year or R5,000 per transaction to 1% of the selling price being charged and are justified by the need for security checks, gate access, training agents on the association’s rules, and marketing within the estate.

Notably, Le Roux highlighted that other service providers, such as plumbers or electricians, aren’t charged these fees.

CEO of Rebosa, Jan le Roux.

He added that Rebosa sought legal advice, which confirmed—under the Property Practitioners Act of 2019—that these practices were considered undesirable business practices.

“Any such arrangement is illegal, and agents are prohibited from engaging in it,” he said.

This is because agents can’t pay fees to HOAs if it gives them an advantage over other agents, which Le Roux said is also against transformation in the industry, which is a big issue.

Le Roux explained that new agents entering the market cannot afford this, giving the paying agent an advantage by limiting access to the estate.

He further explained the tactic also hurts sellers in the estates.

Le Roux pointed out that when an agent has to pay a high fee, they may be less willing to negotiate their commission with the seller.

Additionally, if agents who cannot afford the fee or are unwilling to break the law are excluded, the seller has limited options in choosing their representative.

Le Roux added that this forces sellers to work with an agent who is ‘accredited’ by the estate.

He noted the irony that while the HOAs may benefit financially from this process, it is to the detriment of the seller, and the benefits go to the remaining homeowners.

The good and bad news

Le Roux told BusinessTech that since February, Rebosa hasn’t received any further complaints or cases of HOAs conducting this unlawful practice. In fact, he knows of some HOAs that have stopped the effort and are no longer charging these fees.

He also said that while unlawful profit-making practices could technically impact sectional titles, no cases have been brought to Rebosa’s attention yet.

Le Roux said only the Property Practitioners Regulatory Authority (PPRA) can stop the practice in its entirety and takes this offence very seriously.

However, he noted with concern that the PPRA is not taking action fast enough against these HOAs, and the number of them still engaging in the practice is still way too high—leaving agents and potential sellers “between a rock and a hard place”.

Read: South Africa’s big sectional title problem

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