The forthcoming Housing Consumer Protection Bill is designed to deepen and expand the protection of housing consumers, ensure the integrity of housing build/renovations, and transform the regulatory environment.
History
At the end of 2019, the Department of Human Settlements published the new Housing Consumer Protection Draft Bill, intended to replace the Housing Consumers Protection Measures Act. This new Bill has now reached Parliament after following due process for the approval of the new legislation. It was initially proposed in Parliament (May 2021) and sent to a committee for review before holding open public hearings. Amendments were made based on those hearings, and once Parliament makes its final modifications, it will be sent to the President for approval. The President does have the right to make further amendment suggestions before signing.
New requirements
With the passing of the Bill, those who wish to build or develop housing, as well as those undertaking extensions, alterations, renovations, repairs or installations within and outside of a home, and which require the submission of building plans to a municipality, will be obligated to abide by the new legal requirements. This will provide far deeper protection to the consumer than previously.
The scope of application of the legislation is extended to include not only builders who undertake homebuilding as a business but also owner-builders. Owner-builders are included in the definition of a “home builder” and are required to register with the National Home Builders Registration Council (NHBRC).
Essentially the Bill, says the Department, "seeks to ensure adequate protection of housing consumers and effective regulation of the home building industry through, amongst others, strengthening protection measures, regulatory and enforcement mechanisms as well as prescribing appropriate sanctions or penalties against defaulting persons”.
So, let's break this down into bite-sized pieces.
Types of dwellings under the provisions of the Bill
All dwellings, new or requiring renovations, fall under the provisions of the Act, other than those that do not have a bathroom or kitchen. It also does not matter whether the home is acquired through social housing or subsidy housing. However, any 'temporary' building, considered as such as per the National Building Regulations, is excluded, as are shacks, caravans or those within an informal settlement. Hotels and motels are also excluded. There are exceptions, but these will require consultation between the Minister of Human Settlements and the NHBRC.
Registration of homebuilders
The NHBRC has, since 1998, been the custodian of the Housing Consumers Protection Measures Act, meaning it serves to protect the interests of housing consumers by ensuring that builders comply with prescribed building industry standards.
The NHBRC ensure that registered home builders comply with technical requirements through inspections. In so doing, the NHBRC represents the interests of housing consumers against defects in their new homes. However, this has, under the current Act, not prevented unscrupulous builders who are not registered with the NHBRC from building sub-standard homes, leaving the consumer with no recourse.
Under the Housing Consumer Protection Bill, builders remain mandated to register with the NHBR, pay an annual renewal fee, and abide by the NHBRC Builder Code of Conduct. Not only does this further strengthen the protection of consumers under a Home Warranty Fund (see below), but it will elevate building standards because builders will be required to undergo proper training and grading before being registered as NHBRC home builders. Building standards have been a particular concern of disadvantaged South Africans who have been exposed to substandard housing and poor-quality building materials.
Home Warranty Fund
The NHBRC Home Warranty Fund already exists under the old Act for maintenance claims, roof leak claims, and major structural defect claims. It is used to pay out valid and proven claims by housing consumers whose houses are enrolled with the NHBRC and who are dissatisfied with the service/build of an existing NHBRC-registered builder. But, this is only applicable when such a builder has failed (or is unable) to meet their customer's claim obligation. This fund will continue under the new Act and is likely to be supported by an additional fund at the discretion of the NHBRC.
Under the new Housing Consumer Protection Bill, the warranty covers structural defects that are revealed from the commencement date of the construction and up to five years after the finalisation of the construction of a home. Roof leaks are an exception, with the term being two years after the finalisation of the construction of the home.
Consumers may directly institute a claim against the Home Warranty Fund. There are obvious conditions that come into play, and Private Property will inform you of those at a later date.
Transformation of the regulatory framework
With the expansion of 'protection' to housing consumers, new enforcement tools and prescribed penalties imposed on home builders will, or should, lessen the current high risk of litigation. It does mean, however, that the NHBRC's activities will expand to ensure five key objections:
a. Represent the interests of all housing consumers;
b. Regulate the home building industry;
c. Ensure structural quality of homes in the interests of housing consumers and the home building industry;
d. Promote housing consumer rights; and
e. Provide information relevant to stakeholders in the home building industry.
In the interests of transparency, the NHBRC will be overseen by a Board, which will be responsible for determining the policy and objectives of the NHBRC, as well as monitoring its performance, functions and executions. This Board will comprise between 7 and 15 non-executive members who will be appointed by the Minister through invitation and nomination, after which the Minister will designate from that group a chairperson and deputy chairperson.
The Board, in turn, is allowed to appoint committees that it considers appropriate ‘for the effective functioning of the Board’, says the Bill.
The NHBRC will now have to establish and maintain a massive database comprising registers for homebuilders and developers, enrolment of homes, and other ad hoc registers. It will also be managing the Home Warranty Fund and continue with the inspection of homes, which it has always undertaken. Still, this workload is set to increase dramatically as the registers expand.
The NHBRC will also provide training to homebuilders and ensure satisfactory technical standards in the industry are applied. It will be responsible for communicating with consumers and stakeholders, such as conveyancers, property practitioners, financial institutions and other interested parties, to ensure they understand how the NHBRC can assist with compliance with the Act.
Impacts on property practitioners
According to the Bill, property practitioners (before they even become involved in a sale of a home) will need to take 'reasonable' steps to determine whether the sale of that home firstly relates to a home that has to be enrolled with the NHBRC, and secondly, if it is covered by the Home Warranty Fund.
If the home has not been enrolled as per proper procedure, the property practitioner must inform the NHBRC as well as any prospective buyer, including the consequences of the non-enrolment.
Should a property practitioner NOT comply with the provisions, the NHBRC may report such an individual to the Property Practitioners Regulatory Authority.
Writer: Kerry Dimmer
