Building loan FAQs
How does the NHBRC benefit and protect me?
How do I know and ensure that building regulations are met during the building process?
What can I do if I have a dispute with the builder during the process?
Should I pay cash up front to the builder to commence work?
What is the reason for the 'waiver of builders lien'?
What is 'waiver of builders lien'?
When do I submit the process payment request form?
When is a Building Loan shortfall likely to occur?
When does the bank's valuer inspect the property?
What are the important documents you should ensure you have on file on completion of the property?
How do I know that the tender or quotation provided by the builder is acceptable?
It is advisable for customers to satisfy themselves about the Housing Consumers Measures Protection Act. The NHBRC ensures that all home builders need to register and enroll all homes constructed. For any further information and detail on the requirements of the Act, and what the NHBRC five year structural warranty covers, refer to the NHBRC on their website www.nhbrc.org.za.
Ultimately, the responsibility resides with the customer, who could employ either the services of an architect or engineer to oversee the project, and ensure that building regulations are met. However, in the event of disputes, the customer has the opportunity to approach the NHBRC for technical assistance.
Employ the services of an attorney, but it is always important to ensure that your contract with the builder comprises of a stipulated dispute resolution process. You may also approach the NHBRC or appropriate resolution body with jurisdiction. The bank is not able to act as a mediator to the customer and the builder, the contract exists between the builder and customer, and therefore alternate dispute resolution should be sought.
In the event that there is a shortfall with the loan amount to start the building process, the customer may have to pay the builder from own personal funds. Normally with any contract the builder would have to fund the start of the building process out of their own cash flow; the customer would thereafter need to pay for construction that has already been completed. The customer should never upfront fund the initiation of the project by providing cash up front to any party.
A waiver of builder's lien is signed by the builder to ensure that in the event of the builder absconding the site, that he has renounced, waived and abandoned all his rights, title and interest in and to any lien or right of retention which he may have in regard to certain building and/or structures and/or improvements/materials on site in favour of FNB Home Loans.
This is a legal document where a contractor waives his common law right to hold control and possession over a property or resists to hand over the keys to the Bank when requested to do so, if he is not paid in full.
The bank requires a signed and completed progress payment request form with any required supporting documents, at least five working days prior to the date of expected payment. Do not sign blank progress payment requests or post dated requests with the builder or attorney under any circumstances, as this could result in unauthorised amounts being applied for. Progress payment forms must be signed by all parties. Signing the progress payment request confirms that you are satisfied with the progress and the amount requested by the builder.
If the tender amount by the builder reflects a realistic or market-related construction cost to build your dwelling then the occurrence of a shortfall will be highly unlikely. However if the loan amount approved or required is less than the tender amount, any difference between the loan amount and the tender will have to be paid by the customer from their own funds upfront towards construction progress or the purchase of the land; before the bank will allow any advances from the loan amount. If the tender amount is totally insufficient in relation to a realistic market-related cost to build the dwelling the bank will most probably decline the application upfront or request that the customer supply the bank with another more realistic tender.
A shortfall may occur in the following instances:
The bank will not pay for nor take cognisance of any materials on site.
A valuer will only conduct an inspection when the bank receives a request for a progress payment. This will only be to inspect and assess the progress of the construction work completed in terms of the initial tender submitted
Standard documents which should be issued
Examples of other certificates which may be available (not applicable in all instances)
The bank would recommend that you approach suitably qualified professionals such as an Engineer, Quantity Surveyor or Architect who are able to provide you with all the necessary information regarding your building contract or other technical information relating to the construction process. Acceptance of the quotation provided by the builder is up to the customer to accept. Customers can also do their own market research to establish if the amounts are comparatively acceptable with other properties in the area where new dwellings are being constructed. The bank's valuer is appointed by the bank to assess a realistic market value as security against the loan applied for mortgage purposes only.
Building loan FAQs
