1. Why This Structure?

1.1.  Why was the setup of a Trust chosen as the preferred vehicle, rather than a Home Owners Association (like MPPOA or MPRA), don’t they accomplish the same goals?

The concept that “A Home Owners Association” and a “Trust” are the same is incorrect. In the instance of Marloth Park the “trust” is more akin to the functions of a “Body Corporate” rather than a Home Owners Association. Also, even though body corporates and housing association lay down the rules of communal living and regulations governing the estate or scheme their accountabilities are different.

The body corporate’s function is to manage and maintain the property, which includes the common property (common green spaces, swimming pool clubhouse and other exclusive use areas). To do this they will appoint trustees to act on their behalf and the trustees’ duties will include:

  • establishing a fund via levies paid by the owners for maintenance, management and administration of the common property and payment of taxes, water, electricity, insurance and other necessary services;
  • opening a bank account;
  • insuring the buildings;
  • maintaining the common property;
  • arranging repair of any damage caused once insurance has paid out or has been covered by whoever responsible;
  • informing the Registrar of Deeds and local authorities what the official address of the body corporate will be; and
  • maintaining all the instruments and machines that form part of the common property.

This Body Corporate function is usually provided in a sectional title environment. The body corporate is usually started by the developer and handed over to the Body Corporate on completion of the project. When Marloth started the "Body Corporate" structure did not exist (the law came into play in 1986) but our original private municipality provided most of these functions prior to NKLM taking over.

In a Homeowners’ Association (HOA), each member owns the house and the erf or plot on which the home is situated. Usually established by the residents within a community, an HOA is formed to ensure that the infrastructure of an area is maintained. Another major role of an HOA could be ensuring the safety of those who live within the community (such as a boomed off area).

In Marloth Park our properties are freehold, but we also have common property, so we require both these services. Presently we do not have a Home Owners Association or a Body Corporate. Presently MPPOA can at best justify representing 13% of MP owners, it is unclear how many owners MPRA represent but at best it will be about the same number of owners as MPPOA.

Even if we do not intend to recover or reinforce the ownership of our common property we will need to do the same exercise we are pursuing to put in place a Home Owners Association.

The way forward

Marloth Park needs a vehicle that provides a secure environment to ensure we have the ability to;

  • preserve the ownership of the common assets such as Lionspruit, Henk Van Rooyen, the Game etc. in a way that it is secure for the future for all owners.
  • that has the capacity and authority to act as the custodian of the game in Marloth park.
  • Hold the shares in the Pubic Benefit Company for the beneficiaries.
  • Interact with statutory bodies such as the Municipality with authority and accountability.

The managers (in this case trustees) need to be obliged to perform their tasks in a manner that is beyond scrutiny and be accountable to law. The legal requirements of a trust ensure that this is the case.

In Marloth the intention is to have a trust as the safe securing the assets and acting as a board to ensure the Public Benefit Company performs the management of Marloth’s Assets and provides the “top-up” services in accordance with the Business and sustainability plans – i.e. act as the Body Corporate.

The PBC will work together with the Municipality to ensure services are provided and security is in place – i.e. act as our HOA, but in addition, it will also deliver “top-up services” required to be performed by the Body Corporate function.

It is our plan that the above structure will preferably perform within the structure of a Special Rateable Area (SRA)/ City Improvement District (CID).

(all described in the presentation provided previously).

1.2.  What are the pros and Cons of a “Home Owners Association” (PBC) and a “Body Corporate” (Trust) as they relate to Marloth Park?

This is a very big question with many facets.

The Pros regarding a Trust & PBC within a Special Rateable Area is all described in the presentation provided previously. This structure will take accountability and authority for top-up services and will enforce the municipality to perform basic services.

A trust does not have legal personality because it is effectively an accumulation of assets. In some circumstances – such as for tax purposes – it is regarded as having a separate legal identity. Despite its lack of legal personality, a trust can have legal capacity and the trustees may perform juristic acts as long as the trust deed allows this. It means, in terms of legal action the assets the Trust is protected. That is why the operational function required to manage the assets will be performed through the PBC.

The Trusts trustees owe, both at common law and in terms of statute, a fiduciary duty to the trust’s beneficiaries. The trustees are required to administer the trust solely for the benefit of the trust’s beneficiaries. The Master of the Court will ensure that those who benefit from a trust cannot control the trust. In the case of HOA’s the persons controlling the Association, even though they are elected by the members of the association, are normally also the people benefitting from the HOA.

WE believe WE have answer this in some way in the question above, Dawie also goes a long way to address the Pro’s and Con’s, and other facets will be addressed as you work through our responses.