Buying a home can be an expensive exercise taking into account the high cost of property as well as associated transfer costs. As a buyer, there are various purchasing options that are available to you – and buying property off-plan is one of them. Purchasing your home off-plan means that you enter into a sale agreement that is based on the developer’s blueprints. In certain instances, you also have the opportunity to view a complete sample unit that is on show. However, the unit you ultimately purchase will only come into existence at a later stage.
The advantage of buying property off-plan is that no transfer fees are payable, VAT is often already included in the purchase price, the bank may also often finance the total cost of purchasing the property (including VAT and any applicable fees) and, most importantly, you get a brand new product, which should mean reduced maintenance and repairs – at least during your initial occupation period. While purchasing your home off-plan from a reputable developer may significantly reduce problems you encounter once you occupy your home, no one is immune to the potential associated risks and disadvantages of an off-plan purchase.
For instance, what happens when the complete unit does not match the plans or blueprints? How do you address bad quality finishes and fittings? Are you allowed to simply change your mind about making the big buy? This Legal Insight explores some of the remedies available to protect a buyer of an off-plan home.
The focus of this Legal Insight will be on three key pieces of legislation namely the Housing Consumer Protection Measures Act 9 of 1998 (“HCPMA”); the Consumer Protection Act 68 of 2008 (“CPA”); and the Alienation of Land Act 68 of 1981(“ALA”). These statutes protect you as a buyer at the various stages of purchasing your home off-plan.
HCPMA
You may have been satisfied on the date on which the keys were handed to you and you were taken around by the developer to inspect your new home. But what happens when five months after settling into your new home you notice paint peeling off your living room walls? Or where you notice a leak in your roof on the first anniversary of your occupation in your new home? What more if you notice that the wall is slanted and destined to collapse if you were to experience heavy winds in year five of your occupation?
The good news is that the HCPMA has established the National Home Builders Registration Council (“NHBRC”) where certain complaints of this nature may be lodged. All home builders, including developers, are required to register with the NHBRC, failing which they would be deemed to have contravened the provisions of the HPCMA and liable for a fine not exceeding R25 000 or imprisonment not exceeding a year for each charge that is against them.
Home builders (developers) are required, in terms of section 13(2)(b) of the HCPMA, to:
- Ensure that major structural defects in a home as a result of a home builder’s failure to comply with the NHBRC Technical Requirements, are rectified at its own cost once the home builder has been notified by the buyer (within a period agreed to by the parties but not less than five years from the occupation date);
- Rectify any non-compliance or deviation with regard to the terms, plans and specifications of the agreement as well as any deficiency pertaining to the design, workmanship or material (within a period agreed to by the parties but not less than three months from the occupation date); and
- Ensuring that roof leaks as a result of bad to workmanship, design or materials are repaired (within a period agreed to by the parties but not less than 12 months from the occupation date).
Should you experience difficulties with enforcing the agreement between yourself and the home builder, the NHBRC may be approached for purposes of lodging a complaint (see http://www.nhbrc.org.za/gauteng-lodge-a-complaint/).
CPA
Property for sale, including off-plan developments, are marketed on various platforms including online platforms, billboards and newspapers. When buying off-plan from a developer, the CPA would find application (which would not be the case in respect of a private sale). The application of the CPA is also dependent on whether the buyer is a consumer as contemplated in that statute.
So, can you just change your mind about the transaction? In terms of section 16 of the CPA, a buyer would have a cooling-off period of five business days to cancel the sale after the property is transferred into its name as a result of direct marketing. As a buyer, you may cancel the transaction without reason and also free from any penalty. Should you evoke the provisions of section 16, a developer would be required to provide you with a refund of the purchase price upon receipt the property or your rescission notice.
What about bad quality fittings and finishes? Section 56 of the CPA makes provision for an implied warranty of quality. In terms of this provision. the developer will need to ensure that the property as a whole, is reasonably suitable for the purposes for which they are generally intended. This will require the developer to ensure that the final product handed over to you is—
- of a good quality;
- working well without defects; and
- usable for a reasonable time and in compliance with the applicable standards contained in the Standards Act 29 of 1993.
Quite significantly, section 55(5)(a) of the CPA expressly provides that it is not material whether the product defect concerned is latent or patent or whether the consumer was able to detect the defect upon inspection before the transfer of the property. So even if you did not identify this fault during the inspection with the developer, you do not lose your right of recourse. Should your new off-plan home display any defective or bad quality components within six months of occupation, then you are authorised to direct the developer to replace or repair the defective or unsafe part or to refund the price you paid for those goods. Should the repaired goods become defective again within three months period from the repair date, the developer is required to replace the relevant goods or refund the consumer the price that has been paid for the goods.
Furthermore, section 20(2)(b) of the CPA allows you to return the property to the seller if you did not have the opportunity to examine the property before delivery. As such, you may reject the delivery of your off-plan home in the event that the property concerned is not the type and quality that was envisaged from the sample unit or the blueprints. Where your new off-plan home does not satisfy the particular purpose that was communicated to the developer, you may return it to the developer within 10 business days from when it is delivered to you in terms of section 20(2)(d). You will, once again, be entitled to a full refund of any payments that have been made. The risk and expense of returning the property will also be at the developer’s expense.
ALA
Should you pick up areas of dissatisfaction quite soon, section 29A of the ALA provides you with a right to revoke an offer to purchase or a deed of alienation by delivering a written notice to the developer within 5 days of signing same. You are required to sign this revocation which should be unconditional and identify the offer to purchase or deed of alienation, as the case may be. However, this cancellation right only applies:
- to properties that cost R250 000 or less;
- where you are a natural person;
- where the property is not bought at an auction;
- you have not previously entered into a deed of alienation on terms that are substantially the same;
- you have appointed someone to take over the rights and obligations of the purchase in the offer to purchase or deed of alienation; or
- you have purchased the land in terms of an option that was open for exercise for a period of at least five days.
Conclusion
When immovable property like a home is involved, returning the property or exercising your cooling-off right may, practically, not be a straightforward process, as the Deeds Office would also need to be notified of the reversal and it may also result in the involvement of conveyancers. That said, the short-term inconvenience may well be worth it in the face of long-term dissatisfaction. Most of the provisions above also require the developer to carry the costs of processing reversals, but it may, in any event, be worthwhile to solicit legal advice in relation to your particular case.
Should you roof leak or you wooden floor creak and display bad workmanship in your new off-plan home – consider the avenues that are available to you and hold your developer accountable.
Tshepiso Scott, Director: Tumbo Scott Inc