Home builders to face huge fines for substandard work

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New bill extends NHBRC mandate, protection for consumers.

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.

Additions, 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.”

Maximum 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 craftsmanship.

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.

Alternative 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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