L8. Home Business in a Cluster

Can you operate a small home business in a cluster home scheme? This question came up for decision in a High Court case and its findings will not only affect cluster owners in future but have also served to some extent to determine the conditions under which they may or may not run home-based businesses in a cluster scheme.

1. The Right to Operate a Business in a Residential Area

All properties within municipal areas are rated and zoned for various uses. Estate agents are very familiar with them – residential 1, agricultural, business, industrial, recreational, ecclesiastical, etc. Getting the zoning changed is quite challenging even when there is every justification for doing so. Most rezoning applications take a few years these days to reach finality.

Many years ago, however, local authorities introduced the concept of consent-use, a simplified process allowing people to run small businesses in residential areas. These days provincial and municipal department strongly supports the practice, and you will be familiar with numerous suburbs where both small businesses and normal residences abound. In some streets, small businesses seem to have taken over completely.

Getting permission is not hard – an application for consent use must be submitted. Notices publicising the application must be placed conspicuously in front of the residence giving neighbours the right to object, adequate parking within the premises must be provided, and the business must be noise-free and of a general trading or administrative nature. The manufacturing of products will not be allowed. Councils have in recent times freely granted consent-use rights once their conditions have been complied with. Objectors have invariably been overruled.

Recently a woman in a cluster home scheme in the Cape Town area opened a small hairdressing business on her property. It was open to the public and was supported by some of the other homeowners in the cluster. The rest of them objected, however, and the scheme’s Homeowner’s Association took the matter to the High Court.

2. Homeowners’ Associations in the Western Cape

The woman opposed the application, asserting her rights to use her home for small businesses under a Western Cape provincial law that allows ‘home occupations’ in residential areas provided the owner complies with its obligations. She claimed she had – she had no advertising boards outside her home, parking was not an issue, and all customers had to make a prior appointment with her. The Court originally found in her favour, but the HOA took the matter on appeal to a full bench of the Court.

The Western Cape law is one of the first in South Africa to pay special attention to HOAs and introduce legislation defining their rights and obligations. In the USA virtually all states have their own laws regulating HOAs in cluster home suburbs. In South Africa the Sectional Title Act governs all sectional schemes and, almost consequent to it, homeowners’ associations for cluster schemes have generally been ignored by the lawmakers. Most HOAs are a law to themselves, but municipalities have generally recognised the concept and require an HOA to be established for every cluster scheme, usually as a Section 21 company. The Western Cape Land Use Planning Ordinance of 1985, generally known as LUPO, does not affect other provinces but it does govern HOAs in its own territory.

Section 29 of LUPO provides that an HOA shall be a body corporate like its sectional title equivalent, that it must have its own constitution controlling the management of the scheme, and must be approved by the local authority. The Western Cape High Court had to decide whether owners of the scheme in question could run home businesses in the light of LUPO and the HOA’s own constitution which specifically provided that all its properties may be used only for residential purposes unless a special resolution decided otherwise and that each home had to comply with the zoning regulations affecting it.

3. The Decision of the High Court and its Implications

The Court sided with the HOA. It concluded that LUPO granted HOAs wide powers to govern their schemes, in particular, to prohibit any activity that might adversely affect the rights of owners to enjoy living peacefully as normal suburban residents. Once the Council (in this case the City of Cape Town) had approved the constitution, its provisions became prescriptive and could be imposed on all owners in the scheme.

The HOA had effectively, in this case, overruled a homeowner’s right to obtain a consent-use permit to operate a small home-based business. Every owner was deprived of the rights he might otherwise enjoy under the special provisions applying to areas zoned for residential purposes.

Whether the decision was correct remains to be seen, but it is a common practice in most HOA cluster schemes for residences to be packed tightly together with minimal fencing or walling between units. Parking for customers from outside would obviously become a problem and nuisance if all cluster owners could exercise the right to run small home-based businesses, unlike normal residential suburbs where homes face wide roads and pavements and are usually big enough to allow for parking on the premises.

For the moment the decision only governs cluster homes in the Western Cape, not because High Court decisions there are not binding on other provinces, but because the legislation relied on is exclusive to the province and is purely provincial.

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