| Building
or purchasing a home? Beware, OBS warns The Ombudsman for Banking Services (OBS) receives a constant trickle of complaints from bond holders who are dissatisfied with the banks not supervising the building quality of the property being built. Bond holders are often under
the impression that the bank’s assessor will check the building
quality and alert them to any possible problems or errors in the building
work. The Code of Banking Practice (the code) however clearly states that
the bank will not be responsible for any issues relating to the building
quality. Any assessment done by the bank will only relate to the value
of the security for the bank, not in the bond holder’s interest.
Bond holders are further often unaware of the requirement that the building of any new home must be registered with the National Home Builders Registration Council (NHBRC). In a specific case handled by the OBS, the complainant applied for a building loan during 2004. The application was approved and the bond was registered in April 2005. The building was to commence on a small holding in the district of Kromdraai, Witbank. The complainant’s husband was to act as owner builder and it was alleged that the bank never advised the complainant in respect of the NHBRC requirements. The bank continued to register the bond without verifying whether NHBRC requirements have been met. The complainant and her husband subsequently had to comply with the NHBRC requirements of paying the late enrolment fees and placing R66 000-00 in trust for a period of five years to cover any future structural problems. The complainant had to take out an overdraft facility in order to raise this amount and as a result could not complete the building. She furthermore could not afford the said overdraft. During a mediation the parties agreed that the bank pay an amount of R20 000-00 in respect of damages suffered and change the overdraft interest rate to the prime lending rate. In 2005 complaints regarding mortgage bonds ranked highest on the list of files opened at the OBS (791 files or 19% of the total). Substantial delays in the registration of bonds due to lost title deeds held by the banks contributed to the problems. In a number of cases the bank had to compensate the client for the extra interest charged and in some cases for losses resulting from the delay. Extensive investigations and meetings with the banks resulted in a significant drop in the number of complaints received relating to this issue in 2006. So far 276 files have been opened for the year, which constitutes 17% of the total files opened. The OBS is an impartial
body providing banks and their customers with an efficient dispute resolution
service. During 2005, it opened 4092 files and closed 3736 cases, 53%
in favour of the complainants and 47% for the banks. |