Supreme Court of Appeal rules that trusts must register as home builders

The National Home Builders Registration Council (NHBRC) welcomes the 26 March ruling by the Supreme Court of Appeal (SCA) in the matter of NHRBC vs Mike's Trust, whereby the SCA declared that trusts and/or trustees involved in the business of constructing homes are indeed home builders.

This arises from an NHBRC appeal, lodged on 23 March 2018 in response to a Polokwane High Court judgment, which found that a trust should be excluded from the definition of a home builder as it is not a "person" as defined in the Housing Consumers Protection Measures Act (the Act).

The NHBRC applied for an order declaring that the construction of homes by Mike's Trust and/or its trustees without enrolment with the NHBRC is in contravention of the Act and interdicting the Trust and its trustees from constructing homes without being registered and enrolling same with the NHBRC. The Trust opposed the application on the grounds that a trust or a trustee of a trust is not a "person" and is not required to register as a home builder in terms of the Act.

The appeal was upheld and the SCA held that the intention of the legislature was to include a trust as a person contemplated in section 10(1) of the Act for purposes of registration and enrolment. The court consequently declared that trusts are home builders, as envisaged in the Act, and that at all material time Mike's Trust and its trustees carried on the business of a home builder.

This means that a trust is obliged to register as a home builder and to enrol a home prior to commencement of construction, as per the Act. Any trust carrying on the business of a home builder without being registered and/or enrolling the homes will be contravening the Act and committing a criminal offence. In this regard, the NHBRC is entitled to open criminal cases against the trust and its trustees and/or interdict them from continuing with construction.

"We pursued this matter as it had implications for housing consumers, as it meant that home builders who operated through trusts and were in the business of constructing homes, especially for rental or leasing markets, were no longer obliged to enrol with the NHBRC," said NHBRC CEO Mziwonke Dlabantu.

During a routine inspection in 2013, an NHBRC inspector discovered that the trustees of Mike's Trust were constructing a sectional title housing development while not registered as a home builder and without having enrolled the housing development, as required by law.

According to the Act, all new homes must be enrolled with the NHBRC 15 days prior to construction. Home enrolment insures consumers against poor building practices and permits the NHBRC to conduct building inspections at key stages of construction.

The process of building a new home consists of four main stages of activity where inspections are conducted:

1. Sub-structure (site clearing and foundations); 2. Super-structure (floor to ceiling height); 3. Practical completion (roof and finishes); and 4. Stormwater management.

"Non-compliant home builders are subjected to a disciplinary hearing whereby they can be suspended and not allowed to build any homes. If the home builder is found guilty, they face a fine not exceeding R25 000 per count/contravention, a warning and/or withdrawal of their registration," said Dlabantu.