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Home-builders faced with tough new code of conduct   Article Date :10 Apr 2007 New Code of Conduct for home builders effective March 16. A thirty day window for consumers entering into new building contracts, restrictions on clauses that could erode consumer rights and the capping of deposits form part of a tough and comprehensive new Code of Conduct for home builders that came into effect on March 16 this year. The significant and far-reaching provisions are designed to give protection to housing consumers contracting with home builders for the construction of homes came, according to David Warmback of Durban law firm Shepstone & Wylie. The code has been drawn up by The National Home Builders Registration Council (NHBRC) in terms of Section 7 of the Housing Consumer Protection Measures Act and is intended to provide minimum standards to be maintained by all NHBRC Home Builders. Warmback says all role payers in the residential property development industry, including builders, other property professionals, financial institutions, purchasers and conveyancers, will need to familiarise themselves with the new Code which contains important provisions relating to the development of residential homes. Some of the far reaching provisions embodied in the new Code of Conduct for Home Builders include : * Home building contracts may now only be concluded once the housing consumer has had 30 calendar days to view the contract; * Restrictions on clauses in contracts, which have the effect of taking away consumers common law or statutory rights; * Restricting deposits to no more than 10% of a contract price of a fixed cost building contract; * Minimum clauses that must be included in a building contract, and an obligation that a home builder must retain a copy of the contract and all records relating thereto, for a period of at least six years; * A home builder may not accept final payment under a building contract unless the bank, NHBRC or competent person has certified in writing that the work has been completed according to NHBRC's prescribed minimum standards and guidelines. A home builder is defined in the Act as a person who carries on the business of a home builder and importantly, while the Code is no doubt aimed to target the smaller home builder, against whom most protection is needed for consumers, it will also be applicable to larger residential developers developing and selling residential dwellings whether freehold or sectional title. Home builders are obliged to register with the NHBRC and are obliged to enrol a particular home or development with the Council, submit information relating to a development and pay a prescribed fee. Banks are reminded that they are not allowed under the Act to lend money to consumers against the security of a mortgage bond registered over a home for the purchase of a home from a home builder, unless the Bank is satisfied that the home builder is registered in terms of the Act, that the home is or will be enrolled with the NHBRC and that the prescribed fees have been paid. The Code provides that all NHBRC home builders are obliged to observe the Code and must, as a condition of membership of NHBRC, acknowledge in writing that they have received a copy of the Code. The code may be amended from time to time. Warmback says the 22 chapter code is drafted very simply, and covers the main areas of building contracts where consumers are most vulnerable. Home builders now have a duty to disclose a number of factors relating to a building contract and are under a duty to explain material terms of such contracts. There are also restrictions as to when the builder may commence construction of a home, particularly in circumstances where the land is not yet registered in the name of the consumer. Other chapters include obligations on the home builder not to deceive, mislead or make false statements to the consumer, aspects relating to quality of material and workmanship, duties in respect of contracts and marketing and advertising issues. Unless there is a benefit to a housing consumer, and such benefit is disclosed in a contract, a home builder may not encourage, persuade or influence any housing consumer to use or not use the services of a particular attorney, conveyancer or firm, a financial institution, financial assistance offered by any person, or the services of another home builder. The Code also provides that a building contract must also contain a prescribed list of minimum clauses most of which, Warmback says, are sensible and practical. Importantly the contract must include the date when the home builder must begin building the home and the date when the home will be completed, and in the case of the sale of a sectional title unit off plan, the latest date by which the unit will be registered in the name of the purchaser. Failure by home builders to comply with the Code could have serious consequences in that the NHBRC are entitled in terms of section 11 of the Act, to withdraw the registration of a home builder where such home builder has been found guilty by the disciplinary committee on a charge that the home builder has contravened the Code. “The aim of the Code is the protection of the housing consumer which is clearly needed, and if the Code is strictly adhered to, there is no doubt that consumers will be far better off,” says Warmback. The Code is comprehensive and in seeking to address a vast number of issues, contains many quite onerous provisions for the home builder to comply with. In an industry, which historically has a poor reputation for protecting consumers, particularly in the lower end of the market, it is anticipated that it will take some time before the industry is able to properly embrace the good intentions behind the Code. CLICK HERE TO RETURN TO THE MAIN NEWS PAGE