JENNIFER SMIT AND ALEXI ANDROPOULOS: Housing consumer rights — a bold move for SA’s property sector

In the shadow of the much-discussed Expropriation Act, President Cyril Ramaphosa made a significant yet understated move by also signing into law the Housing Consumer Protection Bill. 

This legislative step, taken on January 27, is poised to reshape the landscape of consumer rights within SA’s housing market, a sector that has been grappling with outdated regulations and consumer vulnerabilities.

The Housing Consumers Protection Measures Act of 1998, which was enacted to enhance the quality and safety of residential construction, established the National Home Builders Registration Council. The council was designed to act as a guardian for housing consumers, much like the Attorneys Fidelity Fund protects against financial malfeasance in the legal sector.

Its primary function was to oversee the registration of homes, ensure they met certain standards and manage a fund that would compensate consumers for damage due to major structural defects — within a five-year warranty period for new builds, or one year for roof leaks.

Over the 25 years since its inception the 1999 act has seen only three amendments, leaving gaps in its applicability to modern construction challenges and economic realities. The maximum claim limit from the fund is still capped at R500,000, a sum that, adjusted for inflation, falls dramatically short of covering the costs associated with serious structural issues in today’s market. According to inflation data, this amount should now be closer to R1.8m, highlighting the urgent need for regulatory updates.

The new legislation, aptly named the Housing Consumer Protection Bill, introduces a suite of enhancements aimed at not only consumer protection but also fostering a more accountable and transparent industry environment:

• Enhanced accountability and rigour. By applying the Public Finance Management Act to the National Home Builders Registration Council, its board and the funds it manages, there’s a push towards more responsible governance and financial management within the council.

• Code of conduct. A new code of conduct will govern council members, home builders, developers and other stakeholders, ensuring ethical practices are at the forefront of industry operations.

• Improved registration processes. The act details a more stringent procedure for the registration, status review and grading of home builders, enhancing the quality control over who can build homes in SA.

• Compliance across sectors. Financial institutions, estate agents and conveyancers are now explicitly required to ensure compliance with the act, particularly concerning the enrolment of properties with the National Home Builders Registration Council. This spreads the responsibility of oversight across more sectors, potentially tightening the net on noncompliance.

• Greater transparency. Enhanced record-keeping by the council and the application of the Promotion of Access to Information Act will make industry practices more open to scrutiny, benefiting consumers and genuine builders alike.

• Consumer recourse expansion. The warranty for roof leaks extends to two years, and the oversight now includes renovations and alterations, not just new constructions. There’s also a new layer of personal liability for the directors or trustees of home builders, which should help deter shoddy workmanship.

• Economic and social benefits. The act aims to create a nurturing environment for new entrants into the home-building industry by using surpluses from the warranty fund for developmental programmes, promoting economic transformation and sustainability within the sector.

The transition from the old act to the new includes provisions to handle ongoing complaints under the updated framework, ensuring that those in process are not left in legal limbo.

However, the success of these reforms hinges on the forthcoming detailed regulations. The claim threshold of R500,000 needs immediate revision to align with inflation and contemporary construction costs. Without this, the fund’s capacity to provide meaningful compensation remains in question, potentially eroding consumer confidence.

For businesses, particularly in the construction, finance and real estate sectors, this act could be a game changer. It promises a more regulated market, where compliance with high standards becomes the norm rather than the exception. This could reduce legal disputes, enhance the reputation of the industry and open new opportunities for growth and innovation.

With the SA housing market looking towards these changes, the real effect will be seen in how well these intentions translate into practice. The Housing Consumer Protection Bill represents a commendable stride towards a more consumer-friendly, transparent and accountable housing sector in SA.

However, it’s the forthcoming regulatory adjustments and their enforcement that will ultimately determine whether this step forward becomes a big leap in consumer rights and industry standards.

• Smit is director and head of construction & engineering, and Andropoulos candidate attorney, at Werksmans Attorneys.