Bad builders: what to do?

Before you sign a contract with any builder, check references as banks do not protect clients from unscrupulous builders, says home loan executive.

Property owners are often ripped off by builders. Some do not complete building the house, others build poor quality and sub-standard houses, said Luthando Vutula, managing executive of Absa Home Loans.

Vutula said where a property owner finds him or herself in such a situation, banks do not protect the owner from the builder.

The contractual obligation that banks have with the client is in terms of the mortgage loan agreement, said Vutula.

He advises that before an owner employs the services of a builder, he or she needs to ensure that they fully understand the content of the building contracts that they sign.

In particular, pay attention to payment clauses, the building specifications and time clauses.

"Always conduct reference checks on the building contractor before signing agreements," he said.

Where the owner is not satisfied with the standard and quality of work, speak directly to the builder or developer (whichever is applicable).

This engagement will give the builder the opportunity to address concerns expressed by the owner and rectify the problem.

If no resolution is reached , as a last resort the owner can instruct the bank to make no further payment on the building until the work has been done to the owner's satisfaction and concerns fully dealt with, said Vutula.

Banks are not party to the building contract signed between the client and the builder.

For this reason, any disputes between the two parties should be taken to the National Home Builders Regulatory Council (NHBRC), a body which protects the interest of consumers and regulate the home building industry.

Vutula said the NHBRC protects consumers from builders who either build to an unacceptable quality standard or builders who refuse to get involved in the rectification of built-in defects in the home.

Although the bank cannot recommend builders to its clients, the legislation stipulates that all builders involved with building projects that are subject to a mortgage loan should be registered with the NHBRC.

Information on registered builders can be obtained form the NHBRC, said Vutula.

While building contractors are not the same, it remains the owner's responsibility to carefully peruse the contract before signing. It is advisable to obtain legal advice for clarity on the contract terms and conditions to avoid unpleasantness with the builder at a later stage, he said.

For example, said Vutula, the client is obliged to pay the builder for work that is satisfactorily completed and the builder has obligations to provide his services as per stipulations in the building contract.

When a client applies for loan on building works on their property, the bank appoints a valuer whose does checks on the construction or building site to ensure work is being carried out in accordance with the minimum building requirements and plans submitted to the bank.

"The client has a right to withhold payment from the builder if the work done is not up to standard," said Vutula.

If this happens, the client should first familiarise themselves with the contract and also be aware of their legal position regarding withholding funds, said Vutula.

He added that the bank can only act on instructions from the client to not to proceed with payments to the builder.

Denise Mhlanga
Realestateweb.co.za - Johannesburg,Gauteng,South Africa