Written for Property Poser

Could he be held liable for paying five percent of the nett profits towards the body corporate when he sells his townhouse?

This is what our Property Poser reader – who says he was only made aware of the existence of an endowment clause to this effect after purchasing the property – would like to know. His unit is currently on the market and our panel of experts advises him on his rights.

Liesel Greyvenstein from Greyvensteins Nortier in Port Elizabeth says all sectional title schemes are controlled and managed, subject to the provisions of the Sectional Titles Act 95/1986, by means of management and conduct rules.

“If the developer or the body corporate does not substitute the standard rules prescribed by the act with alternative ones, then the standard rules will be applicable to the scheme,” says Greyvenstein.

Likewise, she says, when a person buys a full title property in a complex where there is a homeowners’ association, there will also be a constitution and house rules.

“It is standard practice for a sectional title deed of sale to contain a provision whereby the buyer warrants that he or she is aware that the scheme is controlled and managed by rules and that he or she regards him or herself to be bound thereby,” says Greyvenstein.

“A similar clause may be found in sale agreements of full title properties falling under the authority of a homeowners’ association.”

Greyvenstein says if the sale agreement contains such a clause, then the buyer cannot plead ignorance regarding the content of the rules after signing the sale agreement, even if he or she did not receive a copy thereof.

She says should the sale agreement not contain such a clause and the buyer was not informed of the existence of a body corporate, then he or she will nevertheless be bound to the rules, by virtue of the provisions of the act.

Her advice is that a buyer must request a copy of the rules or constitution from the seller or estate agent prior to making an offer on a property.

However, says Warren Jack from the Warren Jack Property Group in PE, because of the fact that not all full title properties fall under the authority of a homeowners’ association, it is quite possible that a buyer may not be aware of the existence of a homeowners’ association when offering to purchase a property.

“In such an instance – if the rules or constitution contains a condition or prohibition that would have caused the buyer to decide against buying the property (for example if there is a penalty when a house is not built within a specified time) – then the buyer may have a claim for damages against the seller if the seller neglected to inform the buyer of the rule,” says Jack.

According to him, with regard to the reader’s situation, if it is standard practice for the body corporate of the scheme in which the reader owns a unit to claim a percentage of the nett profits upon transfer of the unit, then the body corporate would most likely have ensured that they would be able to enforce this right against all future owners.

“They would have done this by inserting a rule that binds all owners and their successors in title to the obligation to pay the endowment. Normally no levy clearance certificate will be issued by the body corporate to the conveyancing attorney until the undertaking has been received,” says Jack.

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