NHBRC’s New Code of Conduct

Private Property South Africa
Denise Simpson

The NHBRC (National Home Builder's Registration Council) has been mandated by

Section 7 of the Housing Consumer Protection Measures Act 95 of 1998 to protect

consumers against unscrupulous Builders, Contractors and Developers. The new

Code of Conduct for Home Builders makes provision for the warrant against poor

workmanship, resulting in structural defects. All newly built residential

dwellings are to be enrolled with the NHBRC by:

  • Developer

  • Contractor

  • Prospective Homeowner

The Builder, Developer and Homeowner need to be registered with NHBRC, as

does the dwelling, regardless of funding, whether cash or Mortgage bond. A

financial institution may not give a home loan if the above has not been

initiated.

NHBRC applies to the following:

  • Full Title Houses

  • Town Houses

  • Sectional Title Flats and Gated Communities

  • Real Right Developments

The warranty scheme only applies to new houses built by home builders

registered with NHBRC and the enrolment provided by the registered home builder

is transferred automatically to anyone who buys the house during the 5 year

warranty period.

Defects and poor workmanship must be recorded formally (in writing) to the

Developer or Contractor as well as NHBRC within 3 months from date of

occupation. Roof leaks attributable to poor workmanship and materials must also

be recorded formally (in writing) to the Developer or Contractor as well as the

NHBRC within 12 months from date of occupation.

The NHBRC warranty takes effect from date of occupation by the Homeowner of the

newly built dwelling, providing that the dwelling was enrolled with NHBRC and

that the NHBRC did not issue a formal letter of non-compliance in accordance

with NHBRC technical requirements.

Significant and far reaching changes came into effect on 16th March 2007, and

have been put into place to offer more protection to the end user who is

contracting with home builders for the construction of residential homes. Dave

Warmback of Durban law firm, Shepstone and Wiley, summarises the changes as

follows:

  • Home building contracts may now only be concluded once the housing

    consumer has had 30 Calendar days to view the contract. There are far

    reaching consequences for Developer/Agent, as it could hold up the process

    of sales.

  • Restrictions on clauses in contracts, which have the effect of taking

    away consumers' common law or statutory rights.

  • Restricting deposits to no more than 10% of contract price of a fixed

    cost building contract.

  • Minimum clauses that must be included in a building contract, and an

    obligation that a home builder must retain a copy of the contract and all

    records relating thereto, for a period of at least six years;

  • A home builder may not accept final payment under a building contract

    unless the bank, NHBRC or competent person has certified in writing that the

    work has been completed according to NHBRC's prescribed minimum standards

    and guidelines.

According to Warmback, "the National Home Builders Registration Council,

acting in terms of Section 7 of the Housing Consumer Protection Measures Act 95

of 1998 ("the Act"), have drawn up and published the Code, which is intended to

provide minimum standards to be maintained by all NHBRC Home Builders."

He goes on to state, "A Home Builder is defined in the Act as a person who

carries on the business of a home builder and importantly, while the Code is no

doubt aimed to target the smaller home builder (against whom most protection is

needed for consumers), it will also be applicable to larger residential

developers, developing and selling residential dwellings, whether freehold or

sectional title. Home builders are obliged to register with NHBRC and are

obliged to enroll a particular home or development with the Council, submit

information relating to a development and pay a prescribed fee."

On the 5th April 2007 the Government Gazette published a draft of the new NHBRC

grading system, which makes provision for the establishment of grading

categories in order to encourage good building practices.

The grading system will be categorised as follows:

  • Responsiveness to housing consumers' complaints

  • Timeous enrolments of homes

  • Compliance with the NHBRC Technical Requirements

  • High quality in building homes

Changes to the above will be made as the need arises.

The Grading system will be used to determine the fees the Builder or Developer

will be charged by the NHBRC. The performance score shall be calculated in

accordance with the new formula, which can be obtained from the Government

Gazette published on 5th April (Vol. 502, number 29747).

Failure by home builders to comply with the NHBRC Code of Conduct could result

in serious consequences. The NHBRC is entitled to withdraw the registration of a

home builder found guilty of contravening the Code.

There is little doubt that consumers will be better off when the Code is adhered

to. End users will finally have recourse against home builders who are guilty of

bad building practices.

For more comprehensive information, visit the NHBRC website at

www.nhbrc.org.

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