Investment Property Developer Errs-Use Safeguards

From Buyincomeproperties.com

Preconstruction Investment
Investment Property Developer Errs-Use Safeguards
By Buyincomeproperties..com
Sep 29, 2005, 04:30

How can you use safeguards when an investmentproperty does shoddy work building your real estate investment?

A warranty certificate retrieved from the National Home Builders’ Registration Council will serve as limited protection for you. Never rely solely on the National Home Builders’ Registration Council (NHBRC) for your recourse against the shoddy workmanship of a developer or builder. This NHBRC warranty certificate only proves your enrolment with NHBRC. It never guarantees good workmanship, and never covers all building defects. The validation lasts five years, but after three months, it covers structural defects only. Your investment properties should last beyond three months.

For projects being built with your home financing you have, the Housing Consumers’ Protection Measures Act. Established in 1999, the NHBRC is a statutory body that falls under the Minister of Housing. The NHBRC was also established to minimize the risk to the banks and mortgage brokerages. Banks will never grant a building secured loan without the developer or builder enrolling with the NHBRC. The homebuilder cannot begin the erection of a home without their NHBRC certificate.

How does NHBRC protect the building of your mortgage investment? Builders or developers enrolment fees, a percentage of their total construction costs; go into an NHBRC warranty fund. That fund is set up to provide consumers assistance in case homebuilders fail their obligations when building. Thus, your investment loans are covered.

NO, NOT SO FAST, your mortgage investment may not be covered if you fail to PERFORM A LONG LIST OF SAFEGUARDS before the developer/builder squanders your money. In the first place, at the start of August 2004, your NHBRC had only 650 million in their warranty scheme. However, if all of the 300 000 properties being constructed by developers/builders back then had structural failure, this scheme would owe $60 billion. They could not possibly bail out your home loans.

THE LONG LIST OF SAFEGUARDS YOU NEED TO PREVENT FORFEIT: NHBRC only will benefit you when you:

1. Provide your developer or builder with a long list of all defects within the first three months of your occupation;

2. Can prove a roof leak results from poor materials or poor workmanship within one year, that is one wet season, starting from the very date of occupation.

3. Can spot that the major structural defects are caused by their non-compliance with NHBRC and its technical requirements. All other home remodeling or repair work you have to pay for yourself.

Imagine paying property insurance and never receiving the benefits you deserve because of numerous loopholes that the average home insurance payee never knew about. From the 1 699 complaints that were lodged with your NHBRC during 2003/04 financial year, there were only 100 that were deemed legitimate by their council.

FOR EXTRA SAFEGUARDS WHEN INVESTIGATING AN INVESTMENT PROPERTY DEVELOPERS/BUILDER remember that just like home owners’ insurance, you have a regulatory committee to help you mediate. If you are dissatisfied with the NHBRC’s ruling, you can ask their council to reconsider their decision. If you still are not satisfied with their reassessment, you can approach a Public Protector for more assistance. Remember, your real estate investment deserves your protection.

Once again, before you ever finance that home loan to buy from any developer, it is vital that you do all of your homework and always find out all that you can about each developer. Ask for a complete list of their previous projects and then contact each of the trustees or homeowners to inquire if they too have had any previous problems with each building. You should also make contact with the NHBRC to find out if some complaints were ever filed against your developer that you have down as possible sale leads.

To aid you in protecting your investment property purchase, you may access its database on its website at (http://www.nhbrc.org.za/), and then read the lists of names of the builders who were suspended at one time by the NHBRC.

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