By the Litigation Department at Shepstone & Wylie Attorneys

Courts are frequently being called upon to intervene in disputes arising in gated communities, where trustees are put in charge of functions that were once the preserve of municipalities.  Living in gated communities is becoming more and more prevalent, according to The Argus, research from Pam Golding Properties shows there are about 6 000 closed communities and estates in South Africa, with 318 000 residential estate homes.

In July this year, the Durban High Court found that the trustees of the Seaward Estate Master Homeowners Associations ("SEMHOA") had acted improperly by purchasing a property within the estate that belonged to the Destiny Life Church.

During 2012 the acquisition of the Church property was considered at a SEMHOA AGM whereby homeowners took the view that the property should not be purchased. At a subsequent AGM in 2014 it was resolved that a sub-committee be established to prepare a business plan for the potential purchase of the property from the Church, the minute of the meeting recorded that a feasibility study would be done which would involved people from the property, financial, legal, town planning and engineering profession and that owners would be asked to vote once the feasibility study had been completed.

Matters turned urgent when it transpired that a charismatic church operating in Richards Bay showed keen interest in acquiring the property, the trustees considered this potential sale a considerable risk to the property values and security of the estate. As such the trustees considered it prudent to put forth an offer to acquire the property in order to prevent a sale to the charismatic church. An initial offer of R6 300 000.00 was increased to R7 200 000.00 when it transpired that the charismatic church was prepared to purchase the property for R7 200 000.00. The offer made by the trustees was accepted and conditional upon it being accepted by the homeowners at a special general meeting to be convened.

The trustees met in August 2014 and resolved to fund the purchase of the church property by raising R8 000 000.00 by way of a special levy in the sum of R12 000.00 from each home owner. At a meeting of the joint residents committee on 6 August 2014 it was resolved that instead of home owners accepting or approving the church property acquisition by way of a 75% majority vote, a simple majority of 50% plus 1 would be sufficient. At the extraordinary general meeting held on 8 October 2014, 59% of home owners participated in the voting process and 41% did not. Of those who voted, 61% were in favour and 39% against accepting and approving the acquisition of the church property.

In arriving at its decision that the trustees had acted improperly the court found that:

• The association, by virtue of its constitution did not have the power to acquire immovable property ;

• A special resolution was required for the confirmation of the church property purchase, in the circumstances the decision taken to reduce the notice period from 60 to 21 days in respect of the calling of the general meeting and that a simple majority of 50% was all that was required for the special resolution to be adopted, without a mandate from homeowners, was unlawful ;

• The method of funding the purchase of the property and the decisions taken in this regard were irregular. The trustees were not empowered to unilaterally decide how the purchase price would be funded and ought to have discussed this issue with home owners.

The transfer of the church property has therefore been interdicted pending the convening of an extraordinary general meeting of home owners.

These home owners in this case were represented by Justin Bagwandeen of Shepstone & Wylie Attorneys.