DEVELOPMENT: NHBRC Insurance Needs Complete Overhaul
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The operations and ambit of the National Home Builders Registration Council (NHBRC), which was set up 10 years ago to protect unsophisticated consumers against unscrupulous developers in the social housing context, urgently need to be reviewed and amended, says Leon Cohen MD of Rabie Property Group, one of the country’s top, award-winning developers.
He said while the NHBRC was initially set up to protect consumers of homes costing less than R250 000, this was soon extended to include all residential developments, regardless of value, while the NHBRC still capped its exposure to R500 000 per unit.
“The last set of NHBRC financial statements to be made public were for 2008 and these reflected the NHBRC had in excess of R2.5 billion invested.
“With further enrolments and interest that amount should now be in excess of R3,5billion.
“There is no way the NHBRC can ever spend all this money as they must be earning about R180million in interest alone on the funds they hold. The 2008 financial statements reflect that they paid out a paltry R4,5million in that year to remedy defects,” he said.
He points out the NHBRC’s risk was further reduced by the fact that developers with a bad track record are prevented from registering with the Council and that those developers that refused to rectify defects were suspended from their developer’s list.
“Since 2003 Rabie Property Group has, like many other developers, paid in excess of R40million to the NHBRC for which it has received little or no benefit.
“It is highly unlikely that any claims against reputable developers will ever have to be paid out by the NHBRC as any such problems are sorted out by the developer who has a reputation to uphold and who wishes to stay in business.”
Cohen says that over five years ago, the NHBRC promised to reduce enrolment fees but to date they still have not done so.
“In addition, Section 23(9) of the Housing Consumers Protection Measures Act, 95 of 1998 provides that the Council Advisory Committee must after five years after commencement of the Act, submit proposals to the Council for recommendation to the Minister regarding introducing outside insurers. This has also not been forthcoming.”
In the early years the NHBRC, he said, continuously quoted the United Kingdom and Australia as providing examples of similar institutions.
“However, those institutions are only in respect of single and double story buildings – not for high rise, large sectional title projects where a full professional team is involved and where these consultants all have their own professional indemnity anyhow. In these instances the NHBRC serves no purpose as many of the building contractors for these developments are listed on the JSE.”
Cohen said unlike other organizations such as SAPOA which provide a hugely valuable service to the property industry, the NHBRC appeared only to be interested in collecting money and running an expensive overhead structure which at the end of the day impacted negatively on property prices and the consumer.
“Furthermore there continues to be a total lack of communication and meaningful interaction by the NHBRC with regards to developers even though promises have been made by them to improve this.”
Cohen said at the very least the NHBRC should pay no claim bonuses or rebates to those developers who had contributed to the fund for years but against whom few if any claims had had to be paid out by the NHBRC.
“Furthermore, there is a dearth of skills in the development sector and the SETA has failed to adequately address the shortage due to lack of funds. It would benefit both the industry and job creation if the NHBRC was to earmark some of its funds to this greatly needed area and look at the reintroduction of apprenticeship training which was so successful years ago.”
Cohen added that a further anomaly was that in most cases the developer was the seller and the link between the contractor and the consumer and were themselves not responsible for the construction of the building.
“Yet developers and not contractors are the party obligated to contract with the NHBRC,” he said.
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