1. DIRECTORATE: HOUSING FRAMEWORK LEGISLATION Proposed Amendments of Sections 10A and 10B of Housing Act No. 107 of 1997 23 August 2006

2. Sections 10A and 10B 1.Background: 1.1Problems giving rise to the need for sections 10A and 10B: Escalating sale of State subsidised houses, mostly for substantially less than the subsidy amount. Prevalence of selling these state subsidised houses to persons who do not even qualify for a subsidised house. State subsidised houses often sold in execution for ridiculous amounts to settle claims by creditors for non-housing related debts.

3. Sections 10A and 10B 1.2Reasons for inserting 10A and 10B under Housing Amendment Act No. 4 of 2001: Protect government’s investment in low cost subsidised housing. Prevent the sale of State subsidised houses for 8 years from date of acquisition. Ensure that State Subsidised houses are available for qualifying beneficiaries if they are vacated before the period of 8 years.

4. Sections 10A and 10B 1.3Practical problems identified with the implementation of Sections 10A and 10B:  Section 10A Offer to provincial housing departments under 10A interpreted as a notice of vacation with the property being deemed as owned by the province, with the “seller” reverting back to the waiting list of persons requiring subsidised housing.

5. Sections 10A and 10B Clearly does not constitute a pre-emptive right in the legal sense but rather a disposition without compensation. No compensation is paid to beneficiary wanting to vacate, such as appreciation of value or improvements made by such beneficiary which could be labeled as unconstitutional under Section 25 of the Constitution.

6. Sections 10A and 10B Procedures pertaining to transfer in the Deeds Office are virtually non-existent, if compared with Section 10B.  Section 10B Pre-emptive right is not linked to the 8 year period provided for in Section 10A. It is not necessary to have Section 10B. Sections 10A and 10B should not be divorced but should be merged.

7. Sections 10A and 10B 2.Proposed amendments to Sections 10A and 10B under the Housing Amendment Bill, 2006: Sections 10A and 10B have been merged to from Section 10A, with Section 10B being repealed. The restriction on the sale of subsidised houses now applies equally to both voluntary sales (current section 10A) and involuntary sales (current Section 10B).

8. Sections 10A and 10B The 8 year pre-emptive period is reduced to 5 years which will be to the beneficiary’s advantage. The 5 year period commences from date of registration of property into beneficiary’s name, not from date of acquisition of property by beneficiary as in current Section 10A. This will result in certainty.

9. Sections 10A and 10B Offers to provincial governments must be accepted or rejected by MEC within 66 days of the MEC’s receipt of the offer. This time-frame is not in current 10A. If beneficiary offers house to provincial government and such offer is accepted a purchase price is agreed between parties and beneficiary is paid the agreed price by province out of the primary bank account of such province.

10. Sections 10A and 10B 3.Conclusion Proposed amendments will lead to certainty and fairness for the beneficiary. Proposed amendments remove possible constitutional challenge to the provisions of the current Section 10A. Proposed amendments provide for a fair process in the exercise of the pre-emptive right as well as a properly stipulated process of transfer of ownership in the Deeds Office. The proposed amendments are acceptable to office of the Chief State Law Advisor.

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