Trouble for estates and complexes in South Africa
Anti-competitive behaviour is becoming a notable concern within estates and completes, and Homeowners Associations (HOAs) are being warned that it harms residents and, in some cases, is outright illegal.
Increasingly, HOAs and property management entities are engaging in exclusive deals that limit residents’ choices, particularly regarding essential services like internet connectivity and even property sales.
This restrictive trend not only impacts the affordability and quality of services but also touches on the legality of such monopolistic arrangements, with implications for residents and estate managers alike.
In October 2024, the Competition Commission, represented by spokesperson Siya Makunga, highlighted this issue.
According to Makunga, the commission has received numerous complaints from residents across the country regarding monopolies on internet service provision within estates.
Many HOAs or body corporates arrange exclusive agreements with a single Internet Service Provider (ISP), depriving residents of the freedom to choose a provider that meets their needs and budget.
This restrictive arrangement raises significant concerns about the rights of residents to fair access and market competition.
In response to this trend, the Competition Commission conducted an advocacy campaign aiming to educate the public on the importance of competitive practices within estates and complexes.
Findings from this initiative reveal that exclusivity arrangements are common, particularly in relation to fibre internet services, where a single service provider is chosen, leaving residents with no alternatives.
This monopolistic model undermines consumer choice and often results in higher costs and potentially subpar services.
For residents in such situations, pursuing legal recourse is currently the only option available. However, this approach is costly and often prohibitive, making it an unfeasible path for many.
South Africa’s National Integrated ICT Policy White Paper, released in 2016, does stipulate that consumers should have a choice of ISPs.
However, the policy has yet to be enacted into law, leaving a gap in enforcement and allowing estates to continue these monopolistic practices.
Recognising this, ISPs and advocates have urged communications minister Solly Malatsi to expedite legislative reforms that would prevent such exclusivity deals in estates and business parks.
Internet access is not the only service impacted by these restrictive practices.
Similar monopolistic behaviours are being observed in the sale of homes within estates and gated communities, complicating property transactions and further limiting choices for both sellers and agents.
Earlier this year, the Real Estate Business Owners of South Africa (Rebosa) flagged cases where certain HOAs were engaging in dubious profit-making practices by imposing fees on estate agents for access to properties.
Rebosa CEO Jan le Roux noted that some estates demand an “agreement” fee from agents before granting access, with fees ranging from R5,000 annually to 1% of the home’s selling price.
Such charges are justified under the pretence of security checks, training agents on estate rules, and marketing access, yet they ultimately restrict agents’ market access and create an advantage for those able or willing to pay.
This pay-to-access model is particularly problematic for new or smaller agents entering the market who may struggle to afford these high fees.
Such practices discourage competition by favouring established agents who can absorb the additional costs, resulting in limited choices for sellers.
Consequently, sellers may have to work with agents “accredited” by the estate, who in turn may pass these costs on to the seller or be less inclined to negotiate their commissions.
This setup disadvantages sellers, limits agency representation options, and potentially violates the legal principles of fair competition.
Le Roux explicitly warns that this arrangement is illegal and urges agents to avoid participating in such schemes.
These anti-competitive practices not only infringe on the rights of residents and sellers but also risk reputational and legal consequences for the HOAs involved.
By restricting choices and implementing pay-to-access policies, HOAs inadvertently undermine the purpose of estates as inclusive, community-oriented environments.
As awareness of these practices grows and calls for legislative reform increase, it serves as a cautionary reminder for HOAs and property managers.
They must prioritise transparency, competition, and resident rights or face potential legal repercussions and backlash from residents who value autonomy and fairness in their living environments.
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