This article looks at when it is necessary in terms of the National Housing Consumers Protection Measures Act 95 of 1998 (“the Act”) for a person or entity to register with the National Home Builders’ Registration Council (NHBRC) as a “home builder”.
In terms of section 10 of the Act, any person or organisation that constructs “homes” must register with the NHBRC. A “home” is basically any structure designed for human habitation. The failure to register as a home builder (when you are in fact a home builder) is a criminal offence and can result in a fine or prison sentence, and it also precludes an unregistered home builder from lawfully obtaining compensation from the housing consumer in terms of the building contract.
In terms of section 10 of the Act, a person who develops property (purchases it, subdivides it or in another manner renders it fit for the construction of homes, uses a contractor to build those homes and then sells those homes to housing consumers) is also required to register with the NHBRC even if it is not the person or organisation that is physically constructing the homes. In a situation where you have a developer who outsources the physical building of the homes to another party (which needs to be an NHBRC registered home builder in order to comply with the law) both the developer and the home builder will thus need to be NHBRC registered in terms of section 10 of the Act. This was confirmed by our Supreme Court of Appeal and the Constitutional Court ultimately in the case of Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC).
The definition of “owner builder” in the Act is relatively strict and it only applies to persons who are building their own home for their own habitation or that of their immediate family. Owner builders are exempt from having to register with the NHBRC in certain circumstances as set out in Section 10A read with Section 29 of the Act.
Property owners / Sellers
In the situation where the owner of a property is not able to or does not want to register with the NHBRC in order to develop the property, that entity could contract with a third party developer to develop the property and build the homes in question, which will then be on-sold by the developer. However, unless the owner is also registered with the NHBRC as a “home builder” when it comes time to sell the homes, it would not be able to lawfully do so unless it has been registered with the NHBRC. This is because section 10 of the Act expressly provides that any person or organisation that wants to build homes or sell homes needs to be registered with the NHBRC.
A property owner who wants to build homes and then rent them out is still required to be registered with the NHBRC even though those homes are not being sold to a housing consumer within the meaning contemplated in the Act. This is because section 10 defines a “home builder” as an entity that builds or sells homes, regardless of what the intention of the property owner or developer is for those homes in the future (i.e. whether they are sold or rented out).
Converting non-residential property into residential homes
Although there is no case law in support of this, it is understood in the industry (and accepted by the NHBRC) that a property owner or developer or builder that converts non-residential properties into residential homes does not need to be registered with the NHBRC in term of the Act. In light of the above, this understanding seems out of kilter with the way that the Act is interpreted and applied by the relevant stakeholders but it is likely that only time (and a court judgment) will remedy this inconsistency.