Developers and builders are generally aware of their obligations to both register and enrol an intended building project with the National Home Builders Registration Council (hereinafter referred as the “Council” created in terms of the Housing and Consumers Protection Measures Act 95 of 1998 (hereinafter referred to as the “Act”).
The obligation to register and enrol is part of the Act’s regulatory system aimed at protecting consumers from substandard building work.
Recently, the Supreme Court of Appeal had to pronounce on whether a developer is required to enrol a development project with the Council and pay the prescribed enrolment fee under section 14 (1) of the Act if the developer had no intention of selling the apartments or developing them under a sectional title scheme.
In National Home Builders Registration Council and Minister of Human Settlement versus Xantha Properties 18 (Pty) Ltd [1] case, the developer embarked upon the construction of property development in Cape Town consisting of shops and residential apartments.
The developer in the present matter expressed that it had no intention of selling these residential apartments or developing them under a sectional title scheme, but its sole purpose was to rent them to prospective tenants.
As a result, the developer although registered as a homebuilder as defined in the Act, disputed being obliged to enrol the development project with the Council or to pay the prescribed enrolment fee under section 14 (1) of the Act, contending that the said section did not require a homebuilder to enrol houses being constructed solely for being let.
The Council and the Minister of Human Settlements contended otherwise and insisted upon the respondent’s development being enrolled and that the developer pays the necessary enrolment fee of over R 1.5 million.
The developer paid the said sum under protest and approached the High Court, Cape Town for a declaratory order that it was not required to enrol the development project or pay the prescribed enrolment fee.
The developer contended that the Act was intended to provide a form of housing insurance in favour of housing consumers against errant home builders.
It submitted that it was the homebuilder and the end-user of the apartments which it intended to rent out and a result it was irrational to expect it to insure it against itself.
It submitted further that despite the definition of ‘business of a home builder’ containing specific reference to homes constructed for the purpose of being let, section 14(1) has no application in such a case by reason of the definition in section 1 of the Act of ‘housing consumer’ which refers to ‘a person who is in the process of acquiring or has acquired a home and includes such person’s successor in title’.
In the view of this, it was argued on behalf of the developer that the word ‘acquire’ used in the definition mentioned above is generally understood as buying or obtaining ownership of something which, in the context of the Act, would mean gaining ownership of a home.
And so the argument went that, a person who rents a property without becoming its owner cannot be said to have ‘acquired’ the property and, by definition, can thus not be a ‘housing consumer’ and that protection afforded to housing consumers in terms of the Act was limited to consumers who either purchase homes or have homes built for them.
The argument put forward on behalf of the developer was that the Act’s regulatory system was not intended to apply to homes being constructed for rental and therefore the provisions calling for enrolment of the development project and payment of the enrolment fee did not apply.
The developer’s application for declaratory order succeeded in the High Court, Cape Town and with the leave of the said court, the Council and the Minister of Human Settlements appealed against the decision.
Following an interpretation of the relevant provisions of the Act, the Supreme Court of Appeal held there was no reason why the legislature would have decided that homes built to be rented out should be treated differently from those constructed for resale.
The Appeal Court further confirmed that the fundamental purpose of the Act is to guard against builders constructing substandard homes.
As a result, the decision of the High Court, Cape Town was overturned, and the declaratory order sought by the developer dismissed with costs.
[1] National Home Builders’ Registration Council & another v Xantha Properties 18 (Pty) Ltd (780/2018 and 784/2018) [2019] ZASCA 96 (21 June 2019)
For more information, contact the professional legal team at Goldberg & de Villliers Inc on 041 5019800. Alternatively, visit 13 Bird St, Port Elizabeth Central, Port Elizabeth, 6001