Property scams! Read all about it

Controversial columnist Paddy Hartdegen takes aim at property scams, the illegal ones as well as those that are legal and institutionalised.

When a group of people are ripped off in a rental scam or a property syndication my initial reaction is one of sympathy – at least until I read the details and then my sympathy tends to evaporate, because clearly, they just didn't think.

If, for instance, you're looking for a property to rent and you stumble across a wonderful home that is priced at a ridiculously low level then surely you're just a little bit suspicious.

When you speak to the "agent" or "owner" and he or she insists that you first pay the deposit and a month's rent before you've even seen the place, alarm bells should sound loudly in your ears.

Other warning lights should flash when you discover that the agent's not in town and will post you the keys once you've paid him or her. If you're stupid enough to pay up, don't be surprised to discover that the house you've just "rented" is lawfully occupied by someone else.

Simple rule – don't pay anything until you've inspected a property. And, remember that anything that is "too good to be true" is exactly that.

Chancers and fraudsters abound in South Africa today, as they have done for more than a hundred years, and their schemes are ingenious: Have any of you heard of the scam that created "Johannesburg North"? The development used the street names of the city itself allowing scamsters to sell property in "Eloff Street", "Commissioner Street" and "Market Street" to idiots living in London, Paris and Munich.

The idiots thought they were getting a bargain on a prime piece of central Johannesburg when, in truth, they purchased an empty piece of veld ten kilometres northwest of the city. Silly people do silly things when they try to buy property at silly prices.

All these scams irk me but not to the same degree as a legalised process that provides a natural conduit to demand money in the form of a warranty and then, when it comes to paying out on the warranty, finds reasons not to do so.

Here I am referring to the National Home Builders Registration Council (NHBRC) and I'm certain that hundreds of employees within this organisation will react with fury to my term "legalised scam". But let's look at some of the facts:

- All new houses must be registered with the NHBRC to qualify for a bond. If alterations are being made to an existing property using bond finance, then these, too, must be registered.

- A builder who is registered with the council must be used to undertake the work.

- A fee to "enrol" the house must be paid upfront – and depending on the value of the completed structure – that fee can be substantial.

The theory is that the NHBRC will protect homeowners by repairing any shoddy workmanship free-of-charge – either by insisting that the builder does the remedial work or, failing that, by sending in its own team of specialists to repair the defects on behalf of the defaulting builder.

The theory sounds wonderful – and yet thousands of complaints stream into consumer protection agencies, newspapers and other watchdog organisations about how the NHBRC has refused to take action against the builder or to repair the faults.

So, in practice, the theory is not working. Consumers have little or no meaningful protection at all.

In terms of the Housing Consumers Protection Measures Act (Act No. 95 of 1998), the NHBRC provides a "deemed warranty" that means a builder must, by law, rectify any defects that occur within the first three months of occupation, rectify any roof leaks that arise in the first 12 months and rectify any structural defects that occur within the first five years.

So let's look at the figures from the NHBRC's last annual report published in 2007:

- The council's revenue increased by 32,6% from R542,1m to R719m, providing a net surplus increase of 24% from R326,2m to R407,3m. That's a lot of loot.

- Its investments rose from R1,4bn to R1,9bn – a rise of 35,1% – and its new enrolments resulted in a rise in income from R496,5m to R585,7m. That's even more loot.

For the NHBRC, money keeps on rolling in.

The Act (and the council itself) says that it's there to protect consumers but how come, in the past five years, the NHBRC has spent just R28,7m on remedial work. In fact in the 12 months covered by the annual report the NHBRC spent just R3,1m on remedial work.

That's equivalent to 0,004% of its enrolment income.

Can anyone tell me that South Africa's builders are so good that the remedial work required on new homes amounts to just 0,004% of those new buildings erected in any given year.

We all know that's rubbish because if the builders were so good we wouldn't need consumer protection at all.

Over the past 12 months, complaints have streamed into Property24.com's website about the NHBRC and its apparent reluctance, or refusal, to meet legitimate claims for poor workmanship, structural defects or leaking roofs. And the NHBRC apparently continues to refuse to meet the claims or resolve the complaints.

Because of this I now intend to compile a dossier of facts about poor building work that has not been remedied by NHBRC. Once I have the facts, I will present the dossier to the NHBRC for its comments.

So I would welcome any experiences readers (or others) have had with regard to the NHBRC and its role in satisfactorily resolving building defects.

It seems to me that there are thousands of disgruntled home owners who have paid enrolment fees to the NHBRC and, despite this, are currently living in defective properties that need to be repaired. It seems that these consumers cannot get the remedial work done and, instead of acting on their behalf to repair the faults, the NHBRC does nothing – other than, perhaps, consider where next to invest their billions.

Unfortunately for consumers there is no option: they must enrol their property with the NHBRC but are completely precluded from arranging their own private insurance because the Act stipulates that only the NHBRC can provide a warranty for building defects.

Various organisations, including the Master Builders Associations, have from time to time tried to set up their own warranty schemes to no avail. The legislation prevents them from doing so.

So let's see what reaction we get if we compile a dossier of facts about the council and present it to them along with copies to Tokyo Sexwale, minister of human settlements, the Council for the Built Environment and to anyone else who might take action.

To assemble the facts I need anyone who has had difficulties with the NHBRC – and who is still living in a defective building – to e-mail me (paddy@neomail.co.za) with the facts. Just send me a brief, factual report (along with any other relevant documents or pictures) and let's compile this dossier.

And let's see what happens after that.

My prediction is that the NHBRC will probably refuse to meet with me or anyone else from Property24 for that matter. I suspect that it will refuse to accept or comment on the dossier and refuse to resolve any legitimate defects contained in this document.

I do hope that's not the case – but let's see.

*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn't pretend to be facts or advice. Contact him at paddy@neomail.co.za.

Readers' Comments
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In a time when we are wracking our brains to figure out how to build homes that can be let at a profit, the NHBRC Scam, because that's what it is, a scam, to provide a lot of make-work jobs for people who do little but collect the fees to add to the coffers which I predict will one day show discrepancies on audit.

A builder tells me that this scam adds much more than the 4% fee that these "officials" charge. This is a millstone around the neck of SA property ownership, and property is the basis of all wealth.

If they did what they were enacted for in some meaningful fashion, they could be contributing to the economy, but it is obvious that it is merely a revenue-collecting organisation with little pretence of providing a service. It was collecting money from home-builders for two years while the inspectors were undergoing training and thus not even pretending to deliver any service.

Questions should be raised in Parliament. - Gideon

NHBRC stands for Nothing Has Been Repaired Certificate. - Arrie Laing

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