Housing Consumers Protection Measures Bill: briefing by Department of Housing

Meeting report

PUBLIC SERVICES SELECT COMMITTEE
31 July 2007
HOUSING CONSUMERS PROTECTION MEASURES BILL: BRIEFING BY DEPARTMENT OF HOUSING

Chairperson: Mr R J Tau (ANC, Northern Cape) 

Documents Handed Out:
Housing Consumers Protection Measures Amendment Bill [B6B-2007]
Housing Consumers Protection Measures Amendment Bill [B6A-2007]
Department of housing: Introducing Housing Consumers Protection Measures Amendment

Audio recording of meeting

SUMMARY
The Department of Housing presented the Housing Consumers Protection Measures Amendment Bill. The Bill was intended to revise problematic issues of interpretation and implementation since the Act had been promulgated. The National Home Builders Registration Council clarified the roles and responsibilities of the Council, and explained the main amendments that would result from the legislation. Clarity in particular was given on owner builders, property that had not been registered, and roof leakage was now included in the matters covered by the Registration Council.

Members raised several questions regarding late enrolment and non-declared late enrolment and its implications. The purpose for exemption of owner builders was questioned, and there were fears that this might lead to some abuse, and the provisions regarding onward transfer of owner built properties were explained. Members were concerned that the NHBRC was claiming to be fully solvent, and pointed out that this solvency must be seen against the fact that there were numerous houses that needed repairing. The implications in regard to subsidy houses were questioned. It became apparent that the discussions were focusing less on the content of the Bill and more on the role and responsibilities of the Registration Council. Members of the Committee felt that the Department had not properly explained what exactly the Bill had set out to do, and were also concerned that they were not fully apprised of the role of the Registration Council and the ambit of its activities, which could be problematic when briefings would take place at provincial levels. The Chairperson indicated that the briefings would shortly follow and appealed to both the Department and the Registration Council to be present.

MINUTES
Housing Consumers Protection Amendment Bill (the Bill): Department of Housing (DOH) Briefing
The Chairperson welcomed everyone and noted that apologies had been received from two members who were unable to attend for personal reasons. He specifically asked that in the absence of a Member from Limpopo the Department should brief the legislature of Limpopo so that none of the provinces were left out.

Mr Khwezi Ngwenya, Senior State Law Advisor, Department of Housing, tabled the first and second versions of the Bill, noting that amendments had been made by the Housing Portfolio Committee. He would concentrate on these amendments in his presentation

In respect of Clause 8 of the Bill, Mr Ngwenya stated that the Housing Portfolio Committee suggested that Clause 8(b)(2) should be deleted, “if money is not available or is expected not to be available for that purpose due to the future demands of the fund” The rationale was that the Portfolio Committee could not expect that the National Home Builders Registration Council would not have money to fulfil its obligation. This phrase would therefore be deleted.

Furthermore in clause 8 (b)2(b), the Portfolio Committee suggested that the phrase “in exceptional circumstances prescribed by the Council” should be included.

The Chairperson suggested that since this was the first briefing that had been heard by some delegates, the presentation should rather focus on the political rationale of what the bill aimed to do, before going into the specifics of the drafting.

Mr Ngwenya outlined the Bill’s intentions to rectify or revise problematic issues of interpretation and implementation encountered since the Act had been promulgated. The Bill clarified the definition of owner builders and the application of the Act to this category. Furthermore allowance had been made for late enrolment or non-declared late enrolment of houses. The Department’s prerequisite that houses should be registered with the National Home Builders Registration Council (NHBRC) prior to the commencement of the construction was provided for in Clause 14 (a) of the bill. Clause 7 dealt with measures taken for late enrolment, non-declared late enrolment or late enrolment fees as prescribed by the Minister or the Council.

Clause 10 was a newly inserted provision that allowed the owner builder to apply for exemption from certain provisions.

The Bill had extended the ambit of the Act’s Section 17 to cover roof leaks and to enable the Council, under certain circumstances, to make payment to the housing consumer in full and final settlement of a claim.

Clause 18 (2) dealt with the duty of the conveyancer in ensuring that a home builder was registered.

Clause 22 amended the Act by the insertion of Section 29, that dealt with people who were dissatisfied with the decision made by the Council, and who were given the opportunity to lodge an appeal with the Minister. Section 29 also allowed the Council to grant or refuse applications for exemption. A further amendment in this section, which had been debated by the Portfolio Committee, noted that the Minister would respond to an appeal within a reasonable time, as it was agreed that it was not desirable to specify that the Minister must respond to a grievance in a specified time frame.

Mr Ngwenya pointed out that there had been a full consultative process of different stakeholders to comment on the Bill. 

Discussion
Mr Kamal Panday (IFP, KZN provincial legislature) requested clarity on late enrolment and non-declared enrolment. 

Mr Phetola Makgathe, Chief Executive Officer, NHBRC, replied that according to the current legislation; everyone had to enrol property 15 days prior to construction. This would serve to notify the NHBRC that the house would be built, and allow it to issue an enrolment certificate. Furthermore, according to the Act no construction should take place before the issue of the certificate.

Mr Makgathe stated that when the Act was promulgated, construction was already occurring so provision was made in the regulations for late enrolment, which was not clearly stipulated in the main Act. This new amendment specifically provided for an amendment to the Act to deal with late enrolment and non-declared late enrolment.

Mr Makgathe continued to define late enrolment as a situation where a person unknowingly started construction without enrolling with the NHBRC, but later enrolled with them, and was a form of proof that the person had taken the relevant steps for the enrolment process. A non-declared enrolment would occur when a person deliberately deceived housing consumers or NHBRC, and the building of the house was discovered only through the inspection process. There would be penalties for this, and processes to ensure the property could be enrolled. The Council would also have a right to refuse enrolment from the builder or consumer if they fail to comply with the requirements.

Mr T Setona (ANC, Free State) asked for the definition as contained in the Principal Act of the “owner builder” and suggested that the concept might be difficult to apply.

Rev P Moatshe (ANC, North West) explained his own experiences of being an owner builder and the challenges faced. He requested clarity on the process used by municipalities for owner builders, and what the law required for people who want to build their own houses.

Rev Moatshe asked whether the “Council” referred to by the presenter was the NHBRC or municipality. He also asked the actual fee charged for late enrolment, and for explanation where and when an owner builder must apply for enrolment.

Mr Makgathe answered that challenges in the past were experienced where people did not want to register or enrol with the NHBRC. According to the Act, these people would have to apply to the Minister for exemption. The previous Minister had delegated this responsibility to the NHBRC, so that a person not wishing to have to enrol with the NHBRC would have to apply to it, giving reasons why he should be exempt. The Act stated that only persons that would be building for their own occupation, who would not sell the property, who had experience in the industry and had skills to personally engage in the construction, would be exempt. The Act would not allow such people to construct not more than two houses. A single person would only have one exemption, thus restricting continuous building and exposure to risk of housing consumers.

Mr Makgathe continued to say that late enrolment and non-declared late enrolment resulted in penalties, where the developer would have to pay NHBRC inspectors to inspect on site as a result of late request. This inspection could be merely addressed to the structure, but could also require a builder to destroy the whole structure in order to see what could be underneath. Late enrolment would be a penalty, since it was intended to deter people from ignoring the need to register.

Mr A Watson (DA, Mpumalanga) asked for clarity regarding the new section 10 in applications for exemption.

Mr Makgathe replied that section 10 addressed the regulation of the industry and was intended to cater for people who wanted to trade but did not have the licence to do so. The Act said that every own builder must be registered with the NHBRC so that the NHBRC could establish control and could monitor the process effectively. The new addition to the section had more clearly defined owner builders, late enrolment and non-declared late enrolment.

Rev Moatshe requested clarity on the warranty regarding roof leaks.
 
Mr Dennis Neer (ANC, Eastern Cape Provincial Legislature) requested the presenter to explain the rationale for the amendments, and the implications of them, particularly in regard to owner builders.

Mr Makgathe responded that the amendments had provided a five year warranty in terms of the Act. Roof leaks were now included as an additional liability, as part of the safeguards to the housing consumer.

Mr Thoran Jeebodh (ANC, Chairperson of the KZN Provincial Legislature Housing Portfolio Committee) referred to the amendments brought about to Clause 8(b). He felt that if money was not available, then it defeated the whole purpose of the warranty and would result in ambiguity. He requested clarity on this.

Mr Setona commented that there was a need for a paradigm shift in the housing construction approach, following the criticisms received on the government’s service delivery. The central issue should be the consumer, and the Bill would have to make sure that the interests of the consumer were protected.

Mr Makgathe explained that the NHBRC was established to protect the consumer and to regulate the home building industry. In regulating the home building industry, the NHBRC issued a registration certificate to the builder, according to section 10, and enrolled the property. In respect of the issue dealt with in Clause 8, he noted that if the NHBRC should be in a situation where it did not have funds, then Parliament or the Ministry would have to provide that funding. When this matter was discussed by the Housing Portfolio Committee, it had specifically looked at the funds available to the NHBRC. For the past 4 years the NHBRC received positive reports in regard to solvency. Based on that, the Portfolio Committee deleted the clause that had originally been included, concerning non-availability of funds. The NHBRC in practice would be liable for all defects and they should not have to come to the Minister or Parliament for funding. 

Mr Jeebodh asked whether or not there was the likelihood of a constitutional challenge to the limitation that only two houses were permitted to be built by owner builders, and questioned who would give the authority and whether there were good grounds.

Mr Makgathe answered that there had been questions raised on this and other points, but he was convinced that the provisions were fully compliant with the law. The NHBRC was to assist the public by ensuring that builders were licensed and by enrolling property. This in turn would help the consumer against unregistered builders

Mr Gideon Hoon, Principal State Law Advisor replied that section 22 of the Constitution would cover this situation. Matters in the public interest could certainly be subject to registration processes. The socio-economic rights, which stipulated that everyone had the right to adequate housing, were also being addressed. He stressed that the intention of the Bill was to protect the housing consumer. 

Mr Jeebodh asked what would happen in situations where the owner had sufficient resources so that there was no need to register with the NHBRC for a warranty.

Mr Hoon responded that the Amendment Bill defined an owner builder. It would not apply to a person who was approved as a home builder/owner builder. They could apply for exemption, and if this was not granted they would have to appeal to the Minister. 

Mr Jeebodh asked what would happen if a person who was an owner-builder would subsequently decide some years later to sell the house, and would need some form of warranty.

Mr Makgathe responded that the warranty was transferable during a period of five years. That meant that a person selling the house within a five year period would be passing on the warranty to the buyer, through the transfer process.

Rev Moatshe (ANC) requested clarification on the people who applied for exemption and whether that also applied to exemption from inspection. Rev Moatshe stated that in communal lands construction was frequently being done by unregistered people, and no inspection was being carried out. He asked how the consumer was protected in such cases.

Mr Panday wondered if the exemptions for the owner builder meant there could be a deviation from the usual standards for construction

The Chairperson referred to rural housing in particular, and asked the extent to which the legislation had been aligned to balance rural and urban housing, or whether this would have to be dealt with in another amendment.

Mr Makgathe replied that the NHBRC was not yet involved in rural housing and stated that they were addressing this issue, and were intending to move into the rural housing area. Presently NHBRC was still helping with designs of rural housing, where, for instance, there had been requests to include toilets inside houses. The NHBRC aimed to have a policy specifically for rural housing but that would happen after the indaba.

Rev Moatshe asked how visible and accessible NHBRC was to the people.

Mr Makgathe responded that NHBRC had offices in all the nine provinces, with provincial managers. They had also established satellite offices, in trying to address this issue. 

Rev Moatshe requested clarity on the money issues. He noted that NHBRC said it was solvent and asked what it was doing with its current funding and what its plans were. He was concerned that NHBRC claimed to be holding money but there were numerous complaints and perhaps these were not yet being addressed.

Mr Makgathe replied that NHBRC had spent over R20 million over a 5 year period to repair non-subsidy houses. However, it had not received claims from Provinces or Municipalities for remedial work, since those properties were not registered with the NHBRC. 

Ms B Dlulane (ANC, Eastern Cape) mentioned that there was a project of women to build RDP houses in the Western Cape, and requested what the involvement was of the NHBRC in projects like that. 

Mr Makgathe replied that NHBRC had offered free training where they had approached women’s organisations, the National Youth Commission and advertised countrywide requesting that people to come for free training. The NHBRC would pay accredited service providers that would be recognised by the sector training authorities, and this initiative would be repeated. Training would be offered to a group of people as opposed to an individual.  

Ms Dlulane stated that the Committee had during inspections viewed truly dreadful houses in the Port Elizabeth, with leaks and cracks. She asked what NHBRC did to repair such houses and if it was within their capacity or funding to pay for those expenses. She also asked about the NHBRC’s involvement in the houses built by municipalities.

Mr Makgathe answered that with regard to all the housing complaints in the subsidy sector, the municipalities, architects and engineers were present, but they did not have supervisors from the NHBRC to play a role, and they knew that no one would take them to court. Together with the National Department, the NHBRC was approaching the provinces and persuading them to enrol their houses with the NHBRC. There were some problems and they might have to re-assert themselves to the provincial housing committees to clarify the role of NHBRC. 

Mr Panday was concerned that non declaration of enrolment in fact resulted in a construction that was strictly speaking illegal. If allowance was made for this in the legislation, he wondered if this would not send out the message that it was being condoned.

Mr Setona asked why the President and Minister of Finance should always be the ones to discover that the people were far better in their shacks than in the RDP houses.

Mr Makgathe stated that the NHBRC have inspectors in respect of the construction, and they were moving to a situation where occupational certificates would be issued. NHBRC also were undertaking forensic audits to provinces to have engineers to evaluate those structures.  

Mr Setona asked if reliance could be placed on the statistics provided by the Department of Housing regarding houses built, unoccupied houses, and damaged houses.

Mr Setona noted that the discussions seemed to have moved from discussions on the Bill itself to more general discussions on the role of the NHBRC. He suggested that this showed a need for a follow up meeting to address the concerns raised on the role of the NHBRC. He agreed that most people were not aware of the services that NHBRC offered and it would be helpful to have a meeting to address all these problems.

Mr Setona further commented that houses were still not repaired and if NHBRC was solvent then it meant that it had money but was not using it. Simultaneously the Department should be included in repair issues, and the two should be accountable in ensuring there was a quality of service delivery of houses to the people.

The Chairperson acknowledged that the NHBRC was not visible to the communities; however, it had briefed the Select Committee before on the kind of services and programmes it offered. There were challenges raised that need to be addressed. He mentioned that he too was surprised to hear Mr Makgathe stating that the NHBRC was solvent, yet there were numerous houses in poor conditions.

The Chairperson asked for an exact indication of what “reasonable time” meant in the Bill in relation to the Minister.

Mr Makgathe replied that the NHBRC could not dictate the time to the Minister hence had left it open to the Department.  
 
The Chairperson asked for the reasons why people applied for exemption, and thought this undermined the purpose of the Act.

Mr Makgathe agreed with the Chairperson and further mentioned that those people who applied for exemption did not want to pay the enrolment fee and they did not want to register. Some of the explanations were that the bodies were not a restrictive institution, and it was stressed that the person would have to prove that the building was for own purposes. Only a small number of people had been exempted from the Act. 

Mr Makgathe apologised for not being able to attend the last meeting. He wished to explain the background to the NHBRC. When it became a statutory body in 2001, it concentrated on the non-subsidy housing and was not involved in the subsidy or state funded housing. The NHBRC moved to the subsidy sector in 2002 on the Minister’s instruction. There were still provinces not enrolled with the NHBRC, which were acting illegally. When ordinary members of the public saw houses, they would immediately ask where the NHBRC was, whereas the NHBRC in fact only was empowered to deal with houses enrolled with it, hence the 15 day enrolment period allowed for.

The Chairperson asked how many of the provinces were not enrolled with the NHBRC.

Mr Makgathe stated that there was quite a large number, but he would provide a list to the Chairperson.

Mr Jeebodh requested clarity regarding any challenge of legality, particularly in respect of no prohibition between buyer and seller. He asked why a person was having to pay when they did not in fact need the services.

Mr Makgathe replied that every time a person wanted to be an owner builder he would have to enrol with NHBRC and agree that the property was for own occupation, and not to be sold within the next five years, to try to avert the situation where incompetent work would be done. He reiterated that no one would be allowed to defy the act. The NHBRC was also pressing for the situation where a conveyancer would not be able to effect transfer of an un-enrolled unit.  
 
Mr Watson suggested there should be a workshop on the NHBRC, its work and home building in general. He expressed his concern that the Members would not necessarily have all the answers available to them when attempting to brief the provinces. He asked the role of the province, the effect of these amendments and the implications of the Department in the provinces.

Mr Watson also noted that some of the questions from Provinces would doubtless relate to the references to the Minister, but not to the MEC.

Mr Hoon replied that he would need to check the principal Act on these points and would report back to the Committee.

The Chairperson indicated that now the Committee had probably given the Department more on which to work and there was probably a sense given to the Department of what the Provinces were concerned with.

Rev Moatshe mentioned that he heard that the satellite office of NHBRC was in Klerksdorp but asked about the other parts of the province. He maintained that the Committee had not been consulted thoroughly since they were not really sure of what its main purpose. 

The Chairperson stated that policy, by its nature, was not static and was influenced by material conditions that required it to evolve. Certain challenges would lead to adjustment of policies. The Chairperson appealed that the Department must note that there were still challenges to be addressed. He suggested that they focus on the bill first and then later on invite NHBRC as an institution to brief the Committee on its programmes. The Chairperson stated that when they returned to the provinces to look at the amendments they would request representatives from both the Department and NHBRC to attend the briefings so that people would be able to get a better understanding. 

Mr N Mack (ANC, Western Cape) said that the Bill gave the impression, in referring to owner builder, seemed to indicate that this term was based upon freedom of choice and reducing the burden of red tape. He asked how the amendments were intended to make the legislation consumer friendly.
Mr Hoon replied that the owner builder was not the consumer, but the person being protected was the general public, who were the housing consumers. 

Mr Jeebodh commented that he was still concerned about some issues. He thought that the term “reasonable time” was open ended. He thought that the wording relating to roof leaks was ambiguous. This would have a bearing on the finances as the NHBRC would need to investigate the causes of the roof leaks.

Mr Setona pointed out that in the law making process it was difficult put time frames and the investigation process also took time. “Reasonable time” would allow for a quality response rather than limited to a time frame.

Mr Makgathe replied that written responses were received from all the provinces. The Department therefore concluded that everyone was aware of the Bill and its contents. The NHBRC would repair any damage that occurred in the first twelve months after construction.

Ms M Oliphant (ANC, KwaZulu Natal) reminded Members that, according to the programme, provinces were supposed to be briefed.  

The Chairperson mentioned that the Committee would be having provincial briefings this week and he requested and appealed to both the Departmental and NHBRC representatives to be present. Furthermore they should be receiving negotiating mandates from the provinces, on the 30 August 2007.

The meeting was adjourned.