Author : Millers Attorneys

Housing Consumers Protection Measures Act 95 of 1998 (part 2)

Financial assistance to housing consumers:

1.The Act obliges the NHBRC to establish a fund to provide assistance to housing consumers under circumstances where a home builder fails to meet his or her obligations with regard to rectifying major structural defects.

2.However, the Council may establish a fund or funds to provide assistance to housing consumers, where;

a. A registered home builder has failed to meet his or her obligations to the housing consumer to rectify all defects due to poor workmanship or materials;
b. A registered home builder has failed to complete an enrolled home and the enrolment of that home has been suspended or cancelled;
c. A registered home builder has misappropriated a deposit from a housing consumer;
d. or for any other purpose, including the training of historically disadvantaged home builders, to enhance housing consumer protection measures covered within the scope of this Act.

(Such a Fund does not exist as at date hereof, and the reason given is that such any Fund in terms of the Act is primarily “fed” from fees which builders have to pay every time they register a home, which will in turn increase building costs.)

3. In this regard, the Council also has a statutory obligation to take prudent measures to manage the riskspertaining to the business of the Council, including any fund, and to secure that the fees or charges payablebyhome builders and provincial housing development boards to the Council are prescribed at levels which will be sufficient, in aggregate, to meet expected demands on the funds of the Council.

4. If at any time the funds of the Council appear insufficient to meet anticipated demands, the Council may, on the recommendation of the funds advisory committee increase the fees payable by home builders and provincial housing development boards.

5. It is strikingly odd that the Council must take measures to manage risks etc, but that it may (rather than, has to) increase fees payable when it realises that the kitty is running low! Where else is the money going to come from?

6. Claims and recourse


a. A major structural defect, which has manifested itself because the home builder failed to comply with the NHBRC Technical Requirements; and

b. Such a defect was reported by the home builder within the 5 years referred to above; and

c. The home builder fails to rectify it; and

d. The relevant home was constructed by a registered home builder, who had been enrolled with the Council and, which home, as at the occupation date, was enrolled with the Council; and

e.The home builder no longer exists or is unable to meet his or her obligations,

7. Only then is the NHBRC is obliged to make a payment for rectification to the housing consumer, to a maximum amount to be determined by the Minister (currently five hundred thousand rand.)

8. However, if the cost of rectification, as estimated by the Council, is less than 5% of the selling price of the home or R4000.00, (whichever is the lesser), the housing consumer must pay for this himself). I.e. the housing consumer must pay (maximum) the first R4000.00.

9. Further however: This obligation to pay, is also subject to:

a.availability of such funds, or

b.if the Council expects funds not to be available for that purpose due to future demands on the fund (who knows what criteria are to be applied, or how exactly that is to be determined), then, and in that case, the Council may reduce the maximum amountpayable (i.e. R500 000.00), or even refuse such claims entirely.

10. The Council may use the R500 000.00 to pay for:

a. professional fees expended by the Council; the

b. necessary costs for rectification, as well as

c. any damage necessarily caused to other structures by such repair work; and

d. reasonable accommodation for the housing consumer where it would have been unreasonable to expect him to continue living in the house, up to a maximum of 5% of the selling price or R25 000.00 whichever isthe lesser. (I.e. a maximum of R25 000.00 can be utilised towards such expenses)

11. The R500 000.00 limit, does NOT cover any damage that has arisen as a result of the defect itself (such as loss of rental income; damages suffered due to default in mortgage repayments etc; any costs which are recoverable under an insurance policy etc).

12. However (YES ANOTHER CONDITION!): Before making such a decision to reduce or refuse to pay at all, the Council must first consult with, and then make recommendations to the Minister in this regard. The Minister must then make a decision on any recommendation within a period of three months.

13. The Council may not exercise such powers (or for that matter prescribe any increased enrolment fees aimed at avoiding a foreseeable, “empty kitty”) unless the Minister has approved such action or, unless his three months to make a decision, have lapsed – i.e. if he has not come back with a decision within three months after a recommendation has been made, the Council may go ahead as it sees fit (but it is not obliged to!).

14. Most unsatisfactory is the fact that the Act is silent on the maximum amount of time the Council and Minister have to consult. In a nutshell, theoretically, we could wait forever.

15. The Act also provides that with the exception of a claim for major structural defects, (which as you will have appreciated by now is a minefield of its own, and is only enforceable after date of occupation), no housing consumer shall have any claim against the Council, pursuant to the failure of a homebuilder to meet his or her obligations in terms of this Act.

16. Obligations of mortgagees and conveyancers

No financial institution may lend money to a housing consumer against the security of amortgage bond registered in respect of a home, with a view to enabling the housing consumer to purchase the home from a home builder, unless that institution is satisfied that the home builder is registered in terms of the Act and that the home is or shall be enrolled with the Council and that the prescribed fees have been or shall be paid.

17. Any conveyancer attending to the registration of a mortgage bond in favour of an institution contemplated above shall ensure that the homebuilder is registered in terms of this Act, has enrolled the home with the Council and has paid the prescribed fees in respect of that enrolment.

18. Inspectors

The Council shall for the purposes of the Act appoint inspectors and enter into agreements or liaise with local government bodies or other bodies or persons for the inspection of homes. An inspector may, for the purpose of inspecting a home during its construction, enter and inspect the premises constituting the site of the construction at any reasonable time. For the purposes of an investigation, an inspector may:

a.Require the production of the drawings and specifications of a home or any part of a home, including plan sapproved by the local authority and plans and specifications prescribed in the Rules or the Home Building Manual, for inspection from the home builder andmayrequire information from any person concerning any matter related to a home or any part of a home;

b.Be accompanied by any person employed or appointed by the Council who has special or expert knowledge of any matter in relation to a home or part of a home; and

c.Alone or in conjunction with any other person possessing special or expert knowledge, make any examination, test or enquiry that may be necessary to ensure compliance with the Home Building Manual.

19. The Council may recover the costs of any examination or test contemplated above from a homebuilder where the homebuilder has failed to comply with the NHBRC Technical Requirements.

20. How it then happens that houses are delivered when there have been patent deviations from the technicalrequirements, remains a mystery!

21. Interdicts

If the Council is of the opinion that a home builder does not comply with the Act, the Council may, despite the imposition of any penalty in respect of that non-compliance and in addition to any other right that the Council may have, at any time on notice to the home builder apply to a court for an order, irrespective of whether any other remedy is available to the Council or not- direct that home builder to comply with the relevant provision;

b. to stop construction of a home; or

c. to grant any other assistance that may be appropriate in the circumstances.

22. Review, arbitration and appeal

The proceedings of the Council may be brought under review before any pision of the High Court within its area of jurisdiction. Alternatively, the Council also has an internal complaints procedure for housing consumers and homebuilders to review any decision or action of the Council`s staff or its agents.

23. If the internal review channel is followed, a housing consumer or a homebuilder may, if it is not satisfied with that outcome, refer the decision or action of the Council, its staff or its agents to the Public Protector for review in terms of the Public Protector Act, 1994 (Act 23 of 1994) to arbitration in terms of the Arbitration Act, 1965 (Act 42 of 1965).