Developers and builders are generally
aware of their obligations to both register and enrol an intended building
project with the National Home Builders Registration Council (hereinafter
referred as the “Council” created in terms of the Housing and Consumers
Protection Measures Act 95 of 1998 (hereinafter referred to as the “Act”).
The obligation to register and enrol is
part of the Act’s regulatory system aimed at protecting consumers from
substandard building work.
Recently, the Supreme Court of Appeal
had to pronounce on whether a developer is required to enrol a development
project with the Council and pay the prescribed enrolment fee under section 14
(1) of the Act if the developer had no intention of selling the apartments or
developing them under a sectional title scheme.
In National Home Builders Registration Council and Minister of Human Settlement versus Xantha Properties 18 (Pty) Ltd  case, the developer embarked upon the construction of property development in Cape Town consisting of shops and residential apartments.
The developer in the present matter
expressed that it had no intention of selling these residential apartments or
developing them under a sectional title scheme, but its sole purpose was to rent
them to prospective tenants.
As a result, the developer although
registered as a homebuilder as defined in the Act, disputed being obliged to
enrol the development project with the Council or to pay the prescribed
enrolment fee under section 14 (1) of the Act, contending that the said section
did not require a homebuilder to enrol houses being constructed solely for
The Council and the Minister of Human
Settlements contended otherwise and insisted upon the respondent’s development
being enrolled and that the developer pays the necessary enrolment fee of over
R 1.5 million.
The developer paid the said sum under
protest and approached the High Court, Cape Town for a declaratory order that
it was not required to enrol the development project or pay the prescribed
The developer contended that the Act was
intended to provide a form of housing insurance in favour of housing consumers
against errant home builders.
It submitted that it was the homebuilder
and the end-user of the apartments which it intended to rent out and a result
it was irrational to expect it to insure it against itself.
It submitted further that despite the
definition of ‘business of a home builder’ containing specific reference to
homes constructed for the purpose of being let, section 14(1) has no
application in such a case by reason of the definition in section 1 of the Act
of ‘housing consumer’ which refers to ‘a person who is in the process of
acquiring or has acquired a home and includes such person’s successor in
In the view of this, it was argued on
behalf of the developer that the word ‘acquire’ used in the definition
mentioned above is generally understood as buying or obtaining ownership of
something which, in the context of the Act, would mean gaining ownership of a
And so the argument went that, a person
who rents a property without becoming its owner cannot be said to have
‘acquired’ the property and, by definition, can thus not be a ‘housing
consumer’ and that protection afforded to housing consumers in terms of the Act
was limited to consumers who either purchase homes or have homes built for
The argument put forward on behalf of
the developer was that the Act’s regulatory system was not intended to apply to
homes being constructed for rental and therefore the provisions calling for
enrolment of the development project and payment of the enrolment fee did not
The developer’s application for
declaratory order succeeded in the High Court, Cape Town and with the leave of
the said court, the Council and the Minister of Human Settlements appealed
against the decision.
Following an interpretation of the
relevant provisions of the Act, the Supreme Court of Appeal held there was no
reason why the legislature would have decided that homes built to be rented out
should be treated differently from those constructed for resale.
The Appeal Court further confirmed that
the fundamental purpose of the Act is to guard against builders constructing
As a result, the decision of the High
Court, Cape Town was overturned, and the declaratory order sought by the
developer dismissed with costs.
 National Home Builders’ Registration Council & another v Xantha Properties 18 (Pty) Ltd (780/2018 and 784/2018)  ZASCA 96 (21 June 2019)
For more information, contact the professional legal team at Goldberg & de Villliers Inc on 041 5019800.