This appeal dealt with whether Xantha Properties 18 (Pty) Ltd (the “Respondent”), registered as a “home builder” in terms of section 1 of the Housing Consumers Protection Measures Act 95 of 1998 (the “Act”), was compelled to adhere to section 14(1) of the Act with regard to homes built only for purposes of being rented. The Respondent conducts business in the building construction industry and as such, it begun construction of a property development consisting of apartments and shops.
The first appellant is the National Home Builders’ Registration Council (the “Council”) and the second appellant is the Minister of Human Settlements (the “Minister”) (collectively referred to as “the Appellants”). The Council requested the Respondent to register as a “home builder” and effect payment of an enrolment fee in respect of the houses built. The Respondent, however, argued that its intention was to develop and lease the apartments and not to sell them and as such, was not compelled to enrol the development project with the Council or pay the necessary enrolment fee in terms of section 14(1) of the Act.
Notwithstanding the above, the Respondent effected payment, albiet under protest, of the enrolment fee which was assessed at approximately R1 500 000.00 by the Council. Thereafter, an application was made by the Respondent in the Western Cape Division of the High Court, Cape Town (“the court a quo”) for an order declaring section 14(1) does not require a home builder to enrol and pay an enrolment fee for houses built only for purposes of being leased.
The court a quo made a decision that section 14(1) of the Act did not apply to the Respondent and as such, granted a declaratory order to that effect. The Respondent appealed the decision with the leave of the court a quo Legislation Section 3 of the Act provides objectives of the Council, which include:
- the regulation of the home building industry;
- the establishment and promotion of ethical and technical standards;
- and the improvement of structural quality in the interest of the industry.
|In terms of section 1 of the Act, a “home builder” is defined as “a person who carries on the business of a home builder” whilst “business” is defined as:
(b) to construct a home for the purposes of sale, leasing, renting out or otherwise disposing of such a home…”
|In April 2008, Section 1 of the Act was amended and the above definition of “business” was inserted in sub paragraph (b) by way of the Housing Consumers Protection Measures Amendment Act 17 of 2007 (“the Amendment Act”)
Section 10 of the Actrequires a “home builder” to be registered and also stipulates that that person may not conduct business as a home builder if not registered.
Section 14(1) of the Act provides that:
|“A home builder shall not commence the construction of a home falling within any category of home that may be prescribed by the Minister for the purposes of this section unless –
(a) the home builder has submitted the prescribed documents, information and fee to the Council in the prescribed manner…”
|Section 1 of the Act defines a “housing consumer” as “a person who is in the process of acquiring or has acquired a home and includes such person’s successor in title.”|
Notwithstanding the definition of “business” above, the Respondent contended that the term “acquire” should be understood as buying or obtaining ownership of something. In this regard, the Respondent argued that housing consumers are limited to people who either bought a house or have a house constructed for them and that the Act does not apply to property built for the intention of being let. For this purpose, the Respondent was therefore not liable for an enrolment fee.
|The SCA held that the Act was drafted in order to protect consumers against incompetent builders and building of homes having structural defects. As such, in order to achieve the aforesaid purposes, it requires home builders to be enrolled the homes they build to also be enrolled. The SCA held that the underlying purpose of the Act trumped the Respondent’s argument in that the Act was drafted in order to afford residents sufficient housing by ensuring that the homes were built by competent builders in terms of approved standards.
Given that the underlying purpose is to protect housing consumers against contractors building sub-standard houses and that the meaning of a home builder was amended to specifically include constructing home for purposes of being leased, the SCA found that the legislature did not have an intention to treat homes constructed for renting purposes differently from those constructed for sale.
Registering both categories of houses built for lease and for sale would prevent sale of houses built below standard. Furthermore, such registration would also prevent unethical constructors from constructing houses of lower standard for purposes of lease and later changing their intention and selling same.
The SCA found that section 14(1) of the Act also applies to houses built for purposes of rental and that the court a quo made an incorrect decision granting the declaratory order. Accordingly, the SCA found that the Act is not arbitrary, irrational or discriminatory and the Respondent’s argument was rejected. The Respondent’s application ought to have been dismissed and accordingly the appeal succeeded.
Section 14(1) of the Act applies to homes constructed with the intention to be leased out. Accordingly, a person that constructs houses for purposes of renting them as opposed to selling them must also register as a home builder and enrol the houses to be constructed. Registration of both houses for sale and for lease prevents the abuse of contractors from building houses of poor standard and relying on the defence that the house was only built to be leased .
Written by Mohau Ledwaba and supervised by Musa Mathebula