Brief Summary

Housing — Housing Consumers Protection Measures Act 95 of 1998 — Whether section 14(1) applies to homes being built for rental purposes rather than sale — Respondent, a registered home builder, constructed residential apartments intending to rent them out and disputed the obligation to enroll the project under section 14(1) — High Court ruled in favor of the respondent, holding that section 14(1) did not apply — On appeal, the Supreme Court of Appeal held that the definition of 'business of a home builder' includes construction for leasing or renting, thus obligating compliance with section 14(1) — Appeal upheld, order of the High Court set aside, and application dismissed with costs.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings were an appeal in the Supreme Court of Appeal concerning the interpretation and application of section 14(1) of the Housing Consumers Protection Measures Act 95 of 1998. The central question was whether the statutory requirement that a home builder must enrol a home with the National Home Builders’ Registration Council before commencing construction applies where the home is built solely for purposes of letting, rather than sale.

The appellants were, first, the National Home Builders’ Registration Council (the statutory body established under the Act to regulate aspects of the home building industry) and, second, the Minister of Human Settlements (responsible for appointing members of the Council and ensuring representivity). The respondent was Xantha Properties 18 (Pty) Ltd, a construction industry participant registered as a home builder under the Act.

In the Western Cape Division of the High Court, Cape Town, the respondent obtained a declaratory order that section 14(1) did not require enrolment of homes constructed solely for rental. The appeal to the Supreme Court of Appeal was brought with leave of the court a quo, and challenged that declaratory order.

The general subject-matter of the dispute concerned the scope of the Act’s consumer-protection and regulatory scheme, particularly how the Act’s requirements of registration and enrolment operate in relation to residential units constructed for rental, as opposed to sale.

Material Facts

The respondent embarked on a property development in Wynberg, Cape Town, consisting of commercial shops and 223 residential apartments. It asserted that it had no intention of selling the apartments or developing them under a sectional title scheme, and instead intended to rent the apartments to tenants.

A dispute arose between the respondent and the Council regarding whether the respondent was obliged, under section 14(1) of the Act, to enrol the project with the Council and pay the prescribed enrolment fee before commencing construction. The respondent’s position was that the Act functioned as a form of protection or “insurance” for housing consumers against defective construction, and that it was conceptually inappropriate to require enrolment where the developer would effectively be “insuring itself” because the units were not to be sold to third-party purchasers.

The Council disagreed and advised that the apartments had to be enrolled. The respondent ultimately enrolled the apartments and paid an enrolment fee exceeding R1.5 million, but did so under protest. It then approached the High Court for declaratory relief that section 14(1) did not apply to homes being built solely for rental, and succeeded in obtaining such an order at first instance.

The fact that the respondent was registered as a home builder, and that the apartments constituted “homes” within the Act’s definition (as read with the regulations), was accepted for purposes of the proceedings. The material dispute was not factual, but concerned the legal interpretation of the Act’s provisions as applied to the undisputed development purpose (rental).

Legal Issues

The central legal question was whether section 14(1) of the Housing Consumers Protection Measures Act 95 of 1998 applies to the construction of homes where the builder’s stated intention is that the homes will be let or rented out, and not sold.

This required determination of an issue primarily of statutory interpretation (a question of law), and secondarily the application of that interpretation to the undisputed facts of the respondent’s development and its intended use.

A further issue arose in the alternative: if section 14(1) did apply to rental construction, whether the relevant statutory and regulatory provisions were unconstitutional, unlawful, and invalid to the extent that they compelled such enrolment, on the basis that the scheme was allegedly irrational in those circumstances.

A final issue concerned costs: whether the respondent should be protected from an adverse costs order under the Biowatch principle on the basis that the litigation implicated constitutional rights (notably the respondent’s reliance on section 22 of the Constitution, the right to choose a trade, occupation or profession freely).

Court’s Reasoning

The Supreme Court of Appeal approached the matter by emphasising the character of the Act as consumer-protection legislation, designed to protect against incompetent home builders and structural defects, and to achieve those aims by requiring registration of home builders and enrolment of homes they build. In this context, the court treated the registration and enrolment mechanisms as components of a broader regulatory scheme aimed at ensuring structural and technical quality, rather than merely providing ex post remedies after defects arise.

The court examined the Act’s definitions, including “home”, “home builder”, and in particular the definition of the “business of a home builder”. The definition expressly includes constructing a home “for the purposes of sale, leasing, renting out or otherwise disposing of such a home.” The court noted that the words “leasing, renting out” were inserted into that definition with effect from 9 April 2008 by the Housing Consumers Protection Measures Amendment Act 17 of 2007, signalling an intention to broaden the statutory reach to encompass homes built for rental purposes.

The respondent’s interpretive argument was that section 14(1) is located in a chapter headed “PROTECTION OF HOUSING CONSUMERS”, and that “housing consumer” was defined as a person acquiring a home; on the respondent’s construction, “acquire” meant obtaining ownership, which would exclude tenants. On that basis, the respondent contended that the Act’s enrolment requirement was not intended to operate where homes were constructed for rental, as tenants would not fall within the relevant protected class.

The court rejected the foundations of this argument. It considered the ordinary meaning of “acquire”, observing that it is not confined to ownership, and expressed the view that the notion that persons who rent their homes have not “acquired a home” in common parlance was untenable. However, the court stated that it was unnecessary to decide conclusively whether the definition of “housing consumer” includes a tenant, and it proceeded (without deciding the point) on the assumption favourable to the respondent that tenants are not “housing consumers”.

Even on that assumption, the court held that the respondent’s interpretation could not be sustained. The court reasoned that, prior to the 2008 amendment, constructing homes for leasing or renting did not fall within the statutory definition of the “business of a home builder”, meaning such builders were not obliged to register or enrol. After the amendment, builders constructing for leasing or renting were brought within the statutory definition and thus within the Act’s regulatory scheme, including the requirement of registration under section 10. The respondent’s suggested approach—accepting registration obligations but excluding enrolment obligations—was treated as incongruous and inconsistent with the amended text, particularly because section 1 provides that defined terms apply throughout the Act “save where the context indicates otherwise”, and the court found no contextual indication that section 14(1) was meant to be excluded for rental construction.

The court also addressed the respondent’s argument that it was “absurd” to require enrolment because the Act operates like insurance and the respondent would effectively insure itself. The court regarded this as insufficient to displace the statutory language and the legislative purpose. It noted that both lessees and purchasers may have contractual remedies, but the Act aims to reduce the need to rely on contractual disputes by ensuring compliance with structural and technical standards during construction. The existence of tenant remedies was therefore not treated as a basis to infer that the legislature intended to exclude rental housing from enrolment.

A further practical and structural consideration reinforced the court’s conclusion. The court referred to the inspection regime in section 19 of the Act, which empowers inspectors to enter sites and inspect homes during construction and to require drawings, specifications, and related information. The court reasoned that without enrolment under section 14, inspectors would not be able to identify homes and fulfil their statutory duties. This was treated as a clear indicator that enrolment was intended to apply broadly to homes constructed within the Act’s scope, including those built for rental.

The court also identified policy-consistent reasons why the legislature would have intended equal treatment between homes built for sale and homes built for lease. It noted that circumstances may change and homes built for rental may later be sold; universal enrolment would prevent substandard homes from reaching the market in such circumstances. It also pointed to the risk of abuse by developers who might claim an intention to rent to avoid regulatory requirements, then later sell the units.

On the alternative constitutional and legality attack, the court rejected the contention of irrationality. It accepted that enrolment entails payment of levies, but characterised those funds as supporting the Council’s activities, including inspection and quality assurance. On that basis, the court found nothing arbitrary, irrational, or discriminatory in requiring enrolment for rental developments.

On costs, the court considered the respondent’s reliance on the Biowatch principle. It reiterated that Biowatch operates to protect unsuccessful litigants from adverse costs orders in genuine constitutional litigation against organs of state, to avoid chilling effects. The court emphasised that merely labelling litigation as “constitutional” is insufficient and that the character and scope of the litigation must be assessed. The court concluded that the matter was, in substance, a commercial dispute aimed at avoiding payment of a substantial sum, and that constitutional considerations played no meaningful role in adjudication. The respondent was therefore not afforded Biowatch protection and was ordered to pay costs.

Outcome and Relief

The Supreme Court of Appeal upheld the appeal and set aside the High Court’s declaratory order. It substituted it with an order dismissing the respondent’s application.

The final order included costs against the respondent, including the costs of two counsel in the appeal and in the court a quo.

Cases Cited

National Home Builders Registration Council v Adendorf & others [2019] ZASCA 20.

Biowatch Trust v Registrar, Genetic Resources, & others [2009] ZACC 14; 2009 (6) SA 232 (CC); 2009 (10) BCLR 1014 (CC).

Harrielall v University of KwaZulu-Natal [2017] ZACC 38; 2018 (1) BCLR 12 (CC).

Lawyers for Human Rights v Minister in the Presidency & others [2016] ZACC 45; 2017 (1) SA 645 (CC).

Legislation Cited

Housing Consumers Protection Measures Act 95 of 1998.

Housing Consumers Protection Measures Amendment Act 17 of 2007.

Constitution of the Republic of South Africa, 1996 (section 22).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

Section 14(1) of the Housing Consumers Protection Measures Act 95 of 1998 applies to homes constructed by a registered home builder even where the homes are built solely for leasing or renting out, and not for sale. The High Court’s contrary declaratory order was set aside, and the respondent’s application was dismissed with costs, including the costs of two counsel.

The alternative constitutional challenge based on alleged irrationality of compelling enrolment in rental developments was rejected. The court also declined to apply the Biowatch costs principle, treating the litigation as essentially commercial in nature and ordering the respondent to pay the appellants’ costs.

LEGAL PRINCIPLES

The Act is consumer-protection and quality-assurance legislation aimed at regulating the home building industry through mechanisms including the registration of home builders and the enrolment of homes prior to construction, in order to promote ethical and technical standards and improve structural quality.

Statutory interpretation is anchored in the text read in context and in light of purpose. Where the legislature amends a definition to expressly include a category of conduct (here, construction for “leasing” and “renting out”), that inclusion is a strong indicator that the regulatory scheme is intended to apply to that category, absent clear contextual indications to the contrary.

The location of a provision within a chapter bearing a particular heading does not, without more, displace the operative effect of the provision, especially where the statutory text and amendments indicate an expanded scope.

Regulatory provisions that support an inspection and compliance scheme (including powers of inspectors and the need to identify projects) may reinforce an interpretation that enrolment requirements are intended to be comprehensive, because non-enrolment would frustrate the scheme’s operation.

The Biowatch principle on costs protects genuine constitutional litigants against adverse costs orders in litigation against the state, but it does not render all litigation framed as “constitutional” risk-free. Courts assess the true character of the dispute; where constitutional issues are not substantive and the litigation is essentially commercial, ordinary costs principles apply and costs may follow the result.

National Home Builders' Registration Council & Another v Xantha Properties 18 (Pty) Ltd (780/2018, 784/2018) [2019] ZASCA 96; 2019 (5) SA 424 (SCA) (21 June 2019)