By Auren Freitas dos Santos
Most freehold property developments involve the subdivision of land into individual erven, often marketed within gated estates. What many purchasers do not fully appreciate, however, is that these developments are typically subject to strict legal requirements — particularly where the municipality requires the establishment of a home owners’ association (more correctly termed an “owners’ association”) to manage shared infrastructure and amenities.
These requirements are not optional; they are imposed by the applicable municipal planning by-laws governing the development.
Despite this being a well-established framework, the legal mechanics underpinning these developments—particularly the developer’s obligations—are widely misunderstood. This has created fertile ground for abuse, with many purchasers finding themselves prejudiced by developers who fail to comply with the law.
This article provides an overview of owners’ associations established under the City of Cape Town Municipal Planning By-Law, 2015, with specific focus on one of the most critical (and frequently breached) provisions: the mandatory transfer of common property.
THE ESTABLISHMENT OF AN OWNERS’ ASSOCIATION
When the City approves a subdivision, it may require the developer to establish an owners’ association in terms of section 61 of the By-law.
This typically applies where the development includes private roads, internal engineering services, private open spaces, or shared amenities.
The purpose of the association is simple: to ensure that these internal services and communal areas are properly owned, managed, and maintained by the collective body of owners, rather than the municipality.
Once an owners’ association is required:
- Every purchaser becomes a member upon transfer of their property and cannot resign.
- The association is a legal entity capable of owning property, suing, and being sued.
- All members are jointly liable for the costs of maintaining the development.
- A constitution (approved and certified by the City) regulates its operation.
- The developer must convene the first meeting within 60 days and facilitate the initial establishment of the association.
Importantly, the association comes into existence upon the transfer of the first unit—meaning that its legal existence is not optional or dependent on later administrative steps.
THE CRITICAL ISSUE: TRANSFER OF COMMON PROPERTY
The Legal Position
The most misunderstood — and most abused — aspect of this process lies in section 54 of the By-law.
Section 54 regulates when transfer of individual erven arising from the subdivision may occur. It provides that no transfer can lawfully take place unless specific conditions are met. Among these, one requirement stands out:
All land designated to be transferred to the owners’ association in terms of the conditions of approval of subdivision— including private roads and private open spaces — must be transferred to the association without compensation, either before or simultaneously with the transfer of the first unit.
This requirement is not negotiable. It is a precondition for lawful transfer.
The implications are clear:
- The developer cannot retain ownership of common property once transfers begin;
- The developer cannot later sell that land to the HOA;
- The developer cannot “hold it back” as leverage; and
- The developer cannot repurpose or redevelop it for profit.
If the first unit is transferred without this requirement being met, section 54(3) makes it clear: a criminal offence is committed.
The Reality on the Ground
Despite this clear legal position, many developments tell a different story.
In practice it is not uncommon to find that developers retain ownership of common property—such as roads, open spaces, or amenity areas—despite proceeding with the transfer of individual erven. These practices are often dressed up in complex explanations or justified on “commercial” grounds.
This is often followed by one of two strategies:
- Commercial leverage: The developer later attempts to sell the retained property to the owners’ association.
- Further development: The developer seeks to rezone or develop the retained land for additional profit.
Both scenarios fundamentally undermine the structure envisaged by the By-Law.
Why This Is Unlawful
This conduct is not merely questionable—it is illegal.
Section 54(1)(d)(iii) expressly requires that all such land:
- Must be transferred to the owners’ association;
- Must be transferred without compensation; and
- Must be transferred before or simultaneously with the first transfer.
Section 54(3) goes further: transferring the first unit without complying with this obligation constitutes a criminal offence.
Accordingly:
- A developer has no legal entitlement to retain common property intended for the association.
- Any attempt to later sell such property to the association is inconsistent with the By-Law.
- Any rezoning or redevelopment of such land (where it was intended to form part of the association) is equally problematic and open to challenge.
Why This Matters for Homeowners
For purchasers, this is not a technical issue — it has real financial and governance consequences.
If common property is not properly transferred:
- Owners may end up paying for infrastructure they do not own.
- The association may lack control over essential services and amenities.
- The developer may retain undue influence; and
- The long-term viability of the scheme may be compromised.
In many cases, owners only become aware of the issue years later—often when disputes arise or when the developer seeks to assert rights over the retained land.
Red Flags for Purchasers
Given how frequently developers fail to comply with their obligations under the City of Cape Town Municipal Planning By-Law, 2015, prospective purchasers should approach these developments with a healthy degree of caution. The following warning signs should prompt closer scrutiny:
1. Common Property Not Registered in the Name of the Association
If private roads, open spaces, or communal facilities are still registered in the developer’s name after transfers have begun, this is a serious concern. In a compliant development, this land should already have been transferred (or be transferred simultaneously with the first transfer) to the owners’ association.
2. Developer “Offering” to Sell Common Areas
Any suggestion that the owners’ association must purchase roads, green areas, or amenities like club houses or tennis courts from the developer is a major red flag. The law requires that such property be transferred without compensation.
3. Vague or Incomplete Subdivision Conditions
If the conditions of approval are unclear about what land must be transferred to the association, or if they are not made available at all, this creates risk. These conditions are central to determining what the developer is legally obliged to hand over.
4. Delays in Calling the First Meeting
The developer is legally obliged to convene the first meeting within 60 days of the transfer of 60% of the land units arising from the subdivision or within two years of the transfer of the first land unit, whichever is earlier. Unexplained delays often indicate poor compliance or an attempt to retain control for longer than permitted.
5. Ongoing Developer Control Over Key Infrastructure
If the developer continues to control security, access roads, or utilities long after transfers have commenced, this may indicate that ownership of these assets has not been properly transferred.
CONCLUSION
The framework established by the City of Cape Town Municipal Planning By-Law, 2015 is clear: developments requiring an owners’ association must vest ownership of common property in that association from the outset, and at no cost to its members.
This is not a matter of negotiation — it is a legal obligation.
Understanding this principle is essential. It is often the difference between a properly constituted development and one fundamentally compromised from inception.
If you have any questions regarding this topic, feel free to contact us at info@theadvisory.co.za for a no-obligation quote.
Specialist Community Scheme Attorney (LLB, LLM), Auren Freitas dos Santos, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Reach out to him via email at info@theadvisory.co.za for a no-obligation quote to discuss this topic in more detail.
