16 September 2019


International Cases

National Home Builders’ Registration Council first appellant minister of human settlements second appellant v. Xantha Properties 18 (pty) ltd respondent

South Africa

21.06.2019

Civil

Homes built for sale to be treated the same way as homes built for lease

The Respondent, Xantha Properties 18 (Pty) Ltd, carries on business in the building construction industry. It embarked upon the construction of a property development in Wynberg, Cape Town consisting of shops and 223 residential apartments. It averred that it had no intention of selling these apartments or developing them in terms of a sectional title scheme but intended to rent them to tenants. In these circumstances, the Respondent disputed being obliged to enrol the project with the first appellant or to pay the prescribed enrolment fee as prescribed by Section 14(1) of the Housing Consumers Protection Measures Act, 1998, to which provisions I shall return in due course.

The Respondent took the matter up with the Council, arguing that the Act was intended to provide a form of housing insurance in favour of housing consumers against errant home builders. It contended that where, as in the present case, there was no third party but the home builder was, itself, the effective end user of the apartments which it intended to rent out, it was absurd to expect it to insure against itself. The Council did not agree and advised the respondent to enrol the apartments. This it ultimately did, and paid the assessed enrolment fee (a sum in excess of R1.5 million) but did so under protest.

Respondent then applied to the high Court for an order declaring that Section 14(1) did not require a home builder to enrol houses being constructed solely for the purpose of being let. Court decided in its favour. The issue in this case is whether the Respondent, who is registered as a ‘home builder’ as defined in Section 1 of Act, is obliged to comply with the provisions of Section 14(1) of the Act in respect of homes being built solely for the purpose of being let.

As the definition of business of a home builder was amended by the Amendment Act to specifically include homes constructed for the purposes of leasing or renting out, thereafter a builder constructing a house for those purposes also became obliged to register as a home builder under Section 10.

Without homes being enrolled under Section 14, inspectors would be unable to identify them or to fulfil their duties or obligations under this section. In itself this is a clear indication that it was intended that all homes were to be enrolled.

The fundamental underlying premise of the Act is to guard against builders constructing substandard homes and that the definition of a home builder’s business was amended to specifically include building homes for purposes of being let or rented out. There is every reason to think that the legislature would have wished homes built for sale to be treated the same way as homes built for lease. Circumstances often change, and it takes little imagination to envisage how a home being constructed for rental purposes might end up being sold rather than let. And requiring both categories of home to be enrolled would not only avoid a sub-standard home being sold in those circumstances, but would also serve to mitigate against the abuse of unscrupulous developers building inferior homes allegedly for leasing purposes, then professing to change their minds and selling them.

Section 14(1) does apply to homes being built for lease and rental purposes. In these circumstances, the court a quo incorrectly reached the contrary conclusion and ought not to have issued the order it did. The order of the court a quo is set aside. Appeal allowed.

Tags : Provision Applicability Enrolment fee

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