24 September 2019

Home building contractors may face fines of up to
R1 million per unit for substandard work, should the Housing Consumer
Protection Bill be enacted.

The bill was published for public comment in the Government
Gazette at the end of August and stakeholders have until the end of October to
submit comment.

It would replace the current Housing Consumers
Protection Measures Act, in terms of which the National Home Builders
Registration Council (NHBRC) registers all home builders and home-building
projects and provides protection against substandard work via a guarantee fund.

alterations, renovations and repairs

The mandate of the NHBRC is being extended in the
bill to include not only new building projects, but also additions,
alterations, renovations and repair work if it is of such a nature that the
local authority requires approved plans. Institutional housing like hospitals,
prisons and old age homes as well as subsidised housing is also covered. Over
and above home builders, the bill also requires developers to register.

As such, the register will for the first time
include grading, much like that of the Construction Industry Development Board
(CIDB), which grades construction companies according to financial and
technical capacity and links a maximum project value to each grade.

If a home builder fails to complete a project
within the time agreed upon, the consumer may report this to the NHBRC and it
could affect the builder’s grading.

The information contained in the register will be
available to the public.

Currently a building is covered for five years and
the roof for one year under the NHBRC’s guarantee scheme. If the bill is
adopted, the minister of human settlements may extend the period of the main
guarantee, and the roof guarantee will be extended to two years, says Julia
Motapola, head of legal services and compliance at the NHBRC. “Some consumers
have been saying there is no guarantee of rain within a year in our dry
country,” she says. “Therefore, we have proposed the extension to two years, to
ensure the roof is at least tested by rainfall.”

fine to increase to R1m

Motapola says at the moment the NHBRC can impose a
maximum fine of R25 000 on builders who are non-compliant. The bill seeks to
increase that to 10% of the project value to the maximum of R1 million per
housing unit, or the full cost of the repairs necessitated by the bad

One of the proposals that concerns developers is
that the MEC or provincial government may not release funds for subsidised
housing unless the requirements of the Act have been met.

Advocate Alwyn Nortjé of listed housing developer
Calgro M3, says that might become an issue if non-compliance by government
departments result in project delays. “One wonders why the bill proposes to
extend its powers to include the prohibition of the release of funds between
the parties, where there are adequate other checks and balances in the bill
itself to ensure compliance,” he says.

dispute resolution mechanism

The bill provides for alternative dispute
resolution and even proposes that the NHBRC might act on behalf of consumers or
appoint someone at the cost of the institution to do so.

It contains several measures to tighten up the
corporate governance of the NHBRC, such as expressly stating that the body has
to operate within the framework of the Public Finance Management Act (PFMA).

Nortjé says the full impact of the bill will only be clear once enacted and after more detail is given in the regulations that will subsequently be published by the minister.

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