Could your HOA stop your sale?

If you’re buying a property in an estate or cluster complex run by a homeowners’ association (HOA), you need to know that you might not be able to resell that property without the approval of the HOA.

This is the effect of a condition to be found in the title deeds of many stands or homes within community housing schemes, even though these are usually “freehold” properties.

What is more, such a condition is binding in law whether the buyer is aware of it at the time of purchase or not.

A clause in the title deed which states that an owner may not sell or transfer his property in an estate or cluster development without the consent of the HOA means that he has to inform the association of his plans to sell, and obtain the required consent, before he can put his home on the market or accept any offer to purchase.

On the other hand, if he does conclude an agreement of sale with a buyer before obtaining consent, the sale must be clearly understood to be subject to the HOA’s consent. If this is not forthcoming, the sale could be void.

In most cases, of course, the HOA’s consent will be quite easy to obtain, provided that the home owner and would-be seller is not in arrears with his levy payments.

However, delays can arise if an HOA withholds consent to “get even” with a seller for past differences – or perhaps just does not give consent timeously.

In addition, an HOA would be well within its rights to refuse an owner permission to sell if it had reason to believe that the proposed buyer would not be able to pay his levies.

Gerhard Kotzé is MD of RealNet

The last 10 years have been a period of unprecedented success for the global private equity industry. During this time, more capital has been raised, invested, and distributed back to investors than ever before.

Private equity funds have produced strong returns globally for investors, outperforming public (listed) markets across all regions for multiple periods to the end of June 2018. The global growth has been fuelled by low-interest rates and a recovering global equity market.

In contrast, SA has seen higher interest rates and an underperforming equity market.

These factors, together with the headwinds of negative sentiment around SA Inc, have made fundraising challenging for private equity managers. With private equity funds taking longer to close, managers are having to demonstrate differentiated and innovative offerings.

These factors create an attractive environment to deploy investment funds.

A closer look reveals the scale and opportunities inherent in the SA private equity industry

It is well established and significant in size relative to most emerging markets.

According to the Southern African Venture Capital and Private Equity Association, the SA private equity industry had R171 billion in funds under management at December 31 2018, having grown at a compound growth rate of 9.3% per annum since 1999.

Investment activity as a percentage of GDP reached 0.8% in 2018, but trails developed markets such as the UK at 2.1% and the US at 1.7%.

It is a great diversification tool and provides access to opportunities that listed equities don’t.

Since 1994, the number of domestic listed companies on the JSE has halved. This makes private equity very appealing due to its ability to provide access and exposure to under-represented sectors on the JSE and companies with high growth prospects that are too small to be listed.

In SA, private equity consistently outperforms most public equity indices.

Over the 10-year period to the end of 2018, private equity outperformed the FTSE/JSE All Share Index (Alsi) on a Total Return Index basis. Over the five-year period to December 2018, private equity outperformed all three listed benchmarks (Alsi, Findi and Swix). Despite its attractiveness, private equity is an under-utilised asset class locally. Looking ahead, what local and global trends may affect private equity investors? There has been a resurgence of listed investment holding companies in SA. Many well-established local private equity managers are expanding their underlying investment offerings to include additional asset classes and sector-specific mandates. Despite the higher regulatory capital requirements, SA banks have expanded their investment teams and have shown a willingness to increase direct private equity investment exposure.

Globally, the need to cater for the long-dated nature of many investors’ liabilities has seen the emergence of “long-duration funds”.

There is an increasing trend for investors to build in-house co-investment capabilities.

Locally and globally, there is an increased focus on impact investing.

Long-term investors who allocate an appropriate proportion of their overall portfolio to private market opportunities should benefit but expertise in portfolio structuring is key.

In most cases, the HOA’s concent would not be a poroblem to get. Local market is well established and well sized

John Seymour is head of Private Equity at Sanlam Investment Alternatives