HOME LOAN AND MORTGAGE DISCLOSURE ACT (63 OF 2000)

A “home loan” is defined as a loan or advance by a financial institution to a person for purposes of constructing, purchasing, renovating or improving a home against security of a mortgage bond or other accepted form of security.

When mortgage finance is necessary, a suspensive condition will be included in the Offer to Purchase setting out the specific terms under which the finance must be approved and these conditions must be fulfilled on or before the time limit stated in the contract, failing which the contract will lapse and be null and void. It cannot be reinstated, even with the agreement of the parties by means of signing an Addendum. Due care should be taken to properly understand the conditions relating to the Bond approval, as once the mortgage bond condition and any other suspensive conditions have been fulfilled, a binding, enforceable contract comes into existence. Financial institutions reserve the right to withdraw the approval should any new or previously undisclosed facts emerge, or should there be a change in circumstances which may prejudice the rights of the financial institution. Financial institutions may also require an Occupancy Certificate from the Local Authority before registering a mortgage bond.

Where the prime interest rate quoted by the financial institutions is increased, the facility in terms of the mortgage bond approval may be withdrawn in the event that the banks find that their rights are prejudiced due to the increase in the bond rate. The withdrawal of the approval does not affect the Seller’s rights to argue that the transfer of the property should proceed as the suspensive conditions were fulfilled. This would place the purchaser in the position that the transfer would have to proceed on a cash basis.

THE HOUSING CONSUMERS PROTECTION MEASURES ACT (95 OF 1998)

In terms of Section 18, no financial institution shall lend money to a housing consumer against the security of a mortgage bond registered in respect of a home, with a view to enabling the housing consumer to purchase the home from a home builder, unless that institution is satisfied that the home builder is registered in terms of this Act and that the home is or shall be enrolled with the National Home Builders Regulation Council (the Council) and that the prescribed fees have been or shall be paid. A conveyancer attending to a bond registration for a housing consumer who is borrowing funds to purchase a house from a home builder is required to ensure that the home builder is registered and the home is enrolled. A home builder in terms of this Act refers to a person who carries out the business of a home builder, and only applies to any dwelling unit constructed by a home builder for residential purposes.

THE HOUSING CONSUMER PROTECTION BILL, 2021

The Housing Consumer Protection Bill was tabled in Parliament during 2021. The Bill aims to repeal the current Housing Consumers Protection Measures Act of 1998 (amended in 2008). The Bill aims to expand the mandate of the Council (to be known as the National Home Builders Regulatory Council).

Clause 2 provides that the Bill applies to the building of a new home as well as to any addition to, alteration, renovation or repair of a home, in so far as the activity necessitates the submission of building plans to the local authority.

In terms of clause 25 a homebuilder or developer who undertakes or commissions the building of a home must apply for registration with the Council. There are no exemptions from registration such as allowed by the current Act. This means that every homebuilder, including a person who builds a house or a home for himself, and a developer, will be required to be registered. The Bill applies to residential property, as well as to a section in a scheme, a unit in a retirement scheme, a home forming part of a housing programme initiated by an organ of the state, a private drainage system from a home to a municipal connection, water services in connection with the home from point of supply to point of discharge at fixtures and appliances, any ancilliary building including garages and storage rooms, any retaining walls required for structural integrity, any adjacent building or wall on common property that has the potential to damage the home should it for any reason collapse.

Clause 83 expands on Section 18 of the current Act, and applies not only to the registration of a mortgage bond but also to a transfer. It requires that conveyancers ensure that a home is duly enrolled, and if it is not, conveyancers attending to the registration of a mortgage bond or to a transfer of a property, will have an obligation to inform the Council and the Registrar of Deeds. The Council may report a conveyancer who does not comply, to the Legal Practice Council (estate agents selling homes are also required to advise the Council of such a transgression). In addition, the Registrar of Deeds must also determine whether the home is so enrolled, and if it is not, the Registrar of Deeds must notify the Council, and he or she may not affect the registration of the deed in relation to that home.

Chapter 6 has compulsory clauses that must be part of any contract before construction starts. These include warranties and prohibitions on payments should the home builder fail to register or enrol the property.