Housing Consumers Protection Measures Amendment Bill [B6-2007]: deliberations & adoption

HOUSING PORTFOLIO COMMITTEE
13 June 2007
HOUSING CONSUMERS PROTECTION MEASURES AMENDMENT BILL [B6-2007]: DELIBERATIONS & ADOPTION

Chairperson: Ms Z Kota (ANC)

Documents Handed Out
Housing Consumers Protection Measures Amendment Bill [B6B-2007]
Housing Consumers Protection Measures Amendment Bill [B6A-2007]
Housing Consumers Protection Measures Amendment Bill [B6-2007]

Audio Recording of the Meeting

SUMMARY
The Department of Housing presented the Housing Consumers Protection Measures Amendment Bill clause by clause. The National Home Builders Registration Council provided clarity on issues of registration of home builders and owner builders. The Council also provided clarity on issues of the roles and responsibilities of the Council in relation to municipalities and to the Minister. Discussions were held around the protection of consumers through registration, enrolment fees, financial sustainability and responsibility of the Council and the communication between consumers, the Council and the Minister. Further discussions related to the checks and balances of the registration system, including the role of the banks and municipalities in ensuring registration. Amendments were made to some of the clauses. The Preamble, Clauses 2 to 7, Clause 9 and Clause 11 were accepted as contained in the draft. Clause 1 was accepted with the rider that the Council must embark on a substantial publicity campaign around the need to apply for exemption. Clause 8 sparked a major debate on the rationale behind the funding not being available. It was eventually accepted in light of the protection provided by Sections 16 and 17 of the principal Act, and subject to amplification by addition of the words "The Council may..." and the clause to include reference to exceptional circumstances prescribed by the Council. The time frames in Clause 10 were discussed, and it was decided that reference should be included to the Minister replying "within a reasonable time". Members voted unanimously to accept the Bill. It would be debated in the National Assembly on 19 June.

MINUTES
Housing Consumers Protection Measures Amendment Bill (B6-2007) (the Bill): Department briefing and clause-by clause deliberation
The Chairperson invited the Department of Housing (DoH) to go through each Clause of the Bill, following the discussions at the last meeting.

Mr Kwezi Ngwenya, Senior State Law Advisor (SLA), Department of Housing, noted that there had been a few changes to the Bill following discussions and comments by the Committee.

Preamble
There was no discussion on this clause

Clause 1: Amendment of Section 1 of Act 95 of 1998 (the Act)
Mr Ngwenya indicated that this contained definitions.

Mr A Steyn (DA) referred to clause 1(c) paragraph (b), regarding the owner builders and late submissions. He understood that this clause was based on the definition of ‘owner builder’ in 1(g). This implied that an owner-builder who had not applied for an exemption became a home builder. This interpretation had been raised by one of the Master Builders' organisations, who stated that anyone doing any building became a home builder unless they applied for exemption, so the onus was on the individual to apply for the exemption to become an owner builder. Many people, especially those who were illiterate or poorly educated, would not realise this, start building their own homes without exemption, and automatically transgress the law. Mr Steyn thought that the reason for the amendments was to clarify the distinction between a home builder and an owner builder, and exempt the owner builder from having to comply.

Mr Gideon Hoon, State Law Advisor, Office of the Chief State Law Advisor, said that from a drafting and legal point of view this was what the Department had wanted. He suggested that the National Home Builders Registration Council (NHBRC) would be in a better position to explain the reason for this.

Mr Phetola Makgathe, Chief Executive Officer, NHBRC, said that an owner builder would be someone whom the Council had declared to be an owner builder. Any other person who was not registered with the Council would not be an owner builder.

Mr Steyn was still concerned about the illiterate people and reiterated that a person would not be recognised as an owner builder until he had applied for exemption from the Council, even though the facts clearly indicated that he was an owner builder. In reality many illiterate people would probably not be aware of this requirement and through their ignorance would transgress the law.

Mr Makgathe explained that there were many people who transgressed the law in ignorance. The aim of the Bill was to bring everyone who was transgressing the law into compliance with the law. The definition meant that anyone who builds a home must be registered. Failure to register meant that the person was operating outside the law.

The Chairperson asked Mr Makgathe to give a more detailed explanation in terms of the requirements of the banks.

Mr Makgathe explained that the agreement between the banks and government meant that no one would be granted a home loan unless they were registered with the Council through the proper channels. Those two mechanisms were strong enough to ensure that the builder and the Council came to an agreement. If an individual used his own finance he was supposed to register with the NHBRC because the Council was protecting the house. The positive effect of the legislation was that in the long term there would be registered home owners countrywide. However, because the Council was in the developmental stage only a few people were being caught, and the Council had not yet reached the point where everybody in the country would be registered. Much still needed to be done in the rural areas. Consumers needed to have legal recourse with builders, and whether or not they were using their own money, they must be registered.

Mr Steyn said that he had no problem with the owner builder. He was however worried about builders who were building for themselves with their own money. The onus was on them to apply for exemption. Therefore the NHBRC should intensify their educational programmes, particularly to people that were illiterate, and emphasise that the applications must be made in order to get exemptions.

The Chairperson asked if the consumer education would be part of the Council’s activities.

Mr Makgathe explained that this was the case.

Mr G Schneemann (ANC) asked how many people were not registered with the Council. He acknowledged that there were many people who were not aware of the requirements, and asked if this had been taken into consideration. He wanted to know if any mechanism such as a grace period had been put in place for registration.

Mr Makgathe said that he had statistics on those who had already been found to have contravened the law. The Council had approximately 11 000 people registered. He did not have the records at present but these could be forwarded to the Committee at a later stage.

Mr S Masango (DA) understood that an owner builder had his own money and wanted to build his own house. He noted that focus on registration but wondered whether there was discussion also about regulating the materials used. He asked if the Department was merely intending to worry about the registration and not about the processes.

Mr B Dlamini (IFP) was concerned about the protection of the consumer. He asked what did the Council or Department envisage as the role of the municipality. If he had his own money and his own materials he would have to apply to the municipality for permission to build. The issue of registration was linked to the interest of the Municipality and a mechanism should be put in place at that stage. Permission from the municipality should be dependent on proof of registration. He asked whether the role of the municipality was dealt with in any Act or in this Bill.

Mr Makgathe said that the issue of materials was picked up on site. If inspectors identified raw materials on site they were immediately disqualified. The Bill did not only deal with registration. The fact that a person was registered as a home builder meant that he would receive a manual and that manual prescribed the process. If a builder was not going to operate by the manual, then there must be a rational design and application to the NHBRC stating how he would go about your home construction. Inspection services were free once the property was registered, and a builder could call the Council at any time. The point that was being raised was a built environment issue. In other countries, such as the UK, the NHBRC approved plans. South Africa was not at this stage yet. Currently there was an agreement with municipalities, and the Council was investigating an inspectorate service. The Council wanted to have greater control on the built environment. This would require some pieces of legislation to be amended, and it was work in progress.

Mr Schneemann said Mr Dlamini had raised an important point about the municipality’s role. He said that when plans were submitted to build a house, there should also be submission of proof that the builder to be used was registered. The municipality should not approve the plans unless there was written proof that the builder was registered. He asked if this was already under debate, or could it form part of the regulations.

Mr Makgathe said that it was being dealt with. The approval of plans was being investigated, and the question had been raised whether there should be an NHBRC stamp before or after approval of the plans. The issues raised about housing consumers and submitting the name of the builder were being looking at. The Council wanted to see how best it could ensure the proper working of the system. There were a number of options, but no decisions had been taken on matters such as fees. The Council was saying that it must allow full investigation before amending.

The Chairperson stated that these issues must be noted so that the Committee could follow up on them.

Mr Steyn stressed that a rigorous consumer education programme must go along with the exemption clause.

Clauses 2 to 5
Mr Ngwenya read through Clause 2 (Insertion of Section 1A in the Act), Clause 3 (Amendment of Section 7 of the Act ), Clause 4 (Insertion of section 10A in the Act ) and Clause 5 (Amendment of Section 14 of the Act.) These were accepted with no objections.

Clause 6: Insertion of Section 14A into the Act
Mr Ngwenya read through the clause, which related to Insertion of Section 14A in the Act.

Mr Steyn understood that the greatest risk was posed to the NHBRC. He was concerned that the Bill was trying to cover all the possibilities, and to police work already done. He pleaded with the NHBRC to pay special attention to this issue. He asked if there were any other recommendations to make this stronger to limit the Council’s risk.

Mr Masango asked about sub-clause 6 (c) (ii), relating to rectification of any defects that constituted non compliance with the NHBRC Technical Requirements. He wanted to know how the Council would ensure payment from the home builder.

Mr Makgathe explained that the NHBRC could monitor the situation. At present the council was liable. This clause made the builder liable, whether or not he was registered. Previously the Council had to pay the penalties.

Mr Masango asked what some of the penalties were.

Mr Makgathe said that there were penalties for late enrolments. Unless a problem was rectified people could not be enrolled. He explained that it was a question of where the responsibility lay. The banks would not give loans if there were no registrations. Builders could not sell units without enrolment. Rectification meant the protection of the consumer.

Clause 7: Amendment of Section 16 of the Act
Mr Ngwenya read through the clause, which was accepted with no amendments.

Clause 8: Amendment of Section 17 of the Act
Mr Ngwenya read through the clause.

Mr Steyn stated that he had a major problem with Clause 8 (b). The fact that money would be paid depending on whether the NHBRC had money left a bitter taste in his mouth. The issue of lack of funds was a growing concern for him. It essentially meant that the Council would continue to accept money but they might not be able to pay claims. The member felt that this was fraudulent. If there was an expectation that no funds might be available then he considered that subparagraph (b) should be removed from the Bill.

Mr Makgathe said that the NHBRC had to make sure that there was sufficient funding each year. Its financial situation was assessed every year. He explained that, according to the Act, if for some reason there were no funds the Portfolio Committee on Housing would have to have a budget vote to protect the housing consumer. The Committee would know a year in advance if the finances were depleted. He emphasised that the Council was capable of meeting its obligations. This clause was intended to cater only for exceptional circumstances. He further emphasised that the Council kept good records, but things did at times go wrong. There was the factor of human error. He gave an example of the Council paying R7 million in Gauteng for units built on a quarry. The Council had to pay the market value on units at the time of the claim. For genuine claims the Council had to pay the full amount. The housing consumer had to be protected and not incur any losses, and this clause ensured that the housing consumer was protected.

Mr Steyn stated that the phrase ‘exceptional circumstances’ in subclause (2)(b) could remain but the phrase relating to the availability of money in the first sentence of subclause (2) was still problematic.

The Chairperson agreed that the new Section 17(b)was a problem, especially the phrase ‘if money...is expected not to be available’. She asked if it could be redrafted.

Mr Dlamini suggested that the clause should be redrafted to read ‘.Subject to subsections (3), (4) and (5),..if money is not available, the Council may reduce any amount’ and then follow this with the subsections (2)(a) and (2)(c), leaving out (2)(b).

Mr Steyn disagreed and said that the phrase ‘reduce any amount’ should remain in (b) and (c). He explained that the problem was the phrase ‘if money is not available’.

Mr Schneemann said that he did not read the clause in the same way as Mr Steyn. He felt that the clause was based on sudden extraordinary demands, where there was only a certain amount of money available, and if this was the situation then the amount could justifiably be reduced. It was not an escape clause to reduce payments. The member pointed out that the same wording was used in the 1998 Act. He asked the Council if they had ever used the clause and under what circumstances this might have arisen. He also asked to whom the NHBRC would have to apply to obtain permission if it wanted to reduce claims in a case where there were not sufficient funds.

Mr Steyn reiterated that his problem with the clause was that it took responsibility away from the Council. If claims increased, then it could possibly be as a result of inspectors not doing their jobs. The clause did not protect the consumer. If the lack of funds in the Council came to parliament to approve additional funding, he did not believe that it was necessary to have this clause in the Bill?

The Chairperson asked why it is was a problem now if it was part of the original Bill.

Mr Steyn pointed out that just because the clause was in the original Bill did not mean that it could not be amended.

The Chairperson asked if there was a loss of faith in the NHBRC.

Mr Schneemann said that in the original version of the Bill had retained most of the wording of the old Section 17. He did not have a problem with this. That was the safety net showing that the NHBRC did not have free reign.

Mr Makgathe read through Section 16 (6) on page 26 of the original Act to explain the process that would occur when funds were insufficient. He explained that there was a process in place and he agreed with Mr Schneemann that Sections 16 and 17 were sufficient protection. He said that the actual concern was the lack of money available. He stated that there was a process in place and only in consultation with the Minister would a decision be taken. There definitely was protection. The purpose of this clause 8 was merely to clarify what was in the original wording.

Mr Steyn said that he accepted the intention behind the clauses but pointed out that the Minister was only human. Nine times out of ten she would take a decision in favour of the NHBRC. He wanted to know where exactly was the guarantee system. He felt that the Council would be taking money, while knowing that they might not have money at a later stage, would pay claims, and then continue as if it was business as usual. He wanted clarity on what the problem was with removing the phrase altogether.

Mr Makgathe suggested that the phrase should perhaps include wording to specify that if the NHBRC could not pay then the government had to pay the debt.

Mr Steyn asked if the clause would still be necessary if that was to be the case. Safeguards were already included and he felt that this clause was objectionable and obsolete. He said that someone would eventually claim. He wanted to know why the NHBRC had to have a back door.

The Chairperson questioned why Mr Steyn was insisting that the clause had to be removed if it was in the principal Act.

Mr Makgathe offered a compromise. He suggested that Clause 8 (b) (2) should be amplified by adding the phrase ‘Council may...." to the references about what would happen if money was not available. He would redraft the clause in the ways suggested.

Mr Steyn agreed to this.

Mr L Modisenyane (ANC) asked if the phrase ‘exceptional circumstances’ had to be defined by the legislation or if it could be defined in the regulations.

Mr Hoon asked if the redrafting could use the same words as the principal Act.

The Chairperson agreed.

Mr Hoon asked whether the drafting must prescribe exceptional circumstances, and whether the references should be to the Minister or the Council.

The Chairperson said that the Council should prescribe exceptional circumstances.

Clause 9: Amendment of Section 21 of the Act
Mr Ngwenya read through the 95 of 1998, clause 9. There were no objections.

Clause 10: Amendment of Section 22 of the Act
Mr Ngwenya read through the clause.

Mr Schneemann raised an objection on behalf of his party, the African National Congress. The party felt that the time period given to respond to a decision taken by Council should be increased from one month to two months. Due to communication systems such as post a safeguard was needed for delays in notices being sent out.

Mr Steyn agreed with the suggestion. He also had concerns around information reaching the person. He felt that the clause only covered knowledge by the Council and not by the individual. He proposed that the clause be further altered to read ‘known by the Council and aggrieved person’. He also raised the issue of no time frames being stated on the part of the response from the Minister.

Mr D Mabena agreed with Mr Steyn’s proposals. He further added that he had a problem with the phrase ‘the Minister may’.

Mr Makgathe said that the first part dealt with exemptions. He asked if Clause 11, (Section 29 (2)) did not adequately cover the issue. This made provision for 60 days, and he asked whether this was considered sufficient.

He proposed that the word ‘must’ be amended by the word ‘shall’.

The Chairperson said that if a time frame was stated in clause 11 then that was acceptable.

Mr Steyn accepted this but he pointed out that this time frame should not only apply to exemptions. He felt that it still did not deal with time frames to govern the Minister.

The Chairperson asked for comments on the issue of time frames for the Minister.

Mr Dlamini said that time frames were dealt with on a case-by-case basis, and could therefore be dealt with by the regulations. He pointed out that Mr Schneemann had suggested two months and that was enough. The issue was being complicated.

Mr Schneemann asked the State Law Advisor to give an indication of what other legislation had done in similar cases, and whether the time frames were determined in the legislation or the regulations.

Mr Hoon said that it was not usual practice to oblige political office bearers to act in a certain time frame. There was a constitutional court case protecting elected people. The Minister had a reasonable time to respond, which had been defined by the court. The consumer or the applicant had the right to approach the Court if a reasonable time had passed without a decision. He did not think it was common to legislate for a time frame.

Mr Steyn therefore suggested that the phrase ‘a reasonable time" should be inserted for clarity into the end of the clause.

Mr Mabena asked whose responsibility it was to inform the party that the decision had been made.

Mr Makgathe said that once a decision of Council was taken on appeal this would go to the Minister. Automatically the Council would be notified that the decision was being appealed.

Clause 11: Substitution of Section 29 of the Act
Mr Ngwenya read through the clause.

Mr Schneemann noted that, for the record, the part that had been read out, but which appeared still in brackets, had in fact been deleted.

Mr Steyn wanted understanding around where the burden rested. He felt that the burden was being taken away from the Minister and now rested with the Council.

The Chairperson explained that the burden now lay with the Council.

Mr Steyn raised an issue whether the Council did make notices in the gazette.

Mr Makgathe explained that the Council could make notices by means of a process through the National Department of Housing.

The Chairperson read the motion of desirability. Each clause was unanimously passed with amendments where stated.

She stated that the Bill was then accepted and would be sent to the National Assembly on 19 June 2007.

The meeting was adjourned.