Housing Code

Part 3

Chapter 9: Discount Benefit Scheme

1. Overview
2. Eligibility and Other Conditions for the Discount Benefit Scheme
3. How to Apply for a Discount Benefit
4. After Approval of a Discount Benefit
5. Administrative Guidelines for The Discount Benefit Scheme
6. Termination of Discount Benefit Scheme
7. Key Points to Remember 

ANNEXURES

This chapter sets out how persons may obtain assistance to acquire registered title to public rental houses, or to repay publicly financed credit that had been used for housing purposes. 

9.1 Overview 

This chapter sets out the rules for application for a Capital Discount on the selling price, or the settlement or partial settlement of an outstanding balance in respect of certain State financed residential properties.

These guidelines replace the Department's 1993 Basic Instructions and Background Document. 

The purpose of the discount benefit scheme is to assist tenants to acquire state financed rental housing, existing sales debtors to settle the balance on properties acquired from the public sector and debtors which obtained housing loans to settle balances on such loans. It is a discount on the selling price or balance owing by the beneficiary. Application must be made to the authority which lets (or has sold or issued a loan) the property. The scheme applies only to state financed property which was first occupied before 1 July 1993 and to units or stands contracted for by 30 June 1993, if allocated to individuals by 15 March 1994. The discount benefit is for an amount not exceeding R7 500, with household income not taken into consideration.

The Discount Benefit Scheme applies to State financed units regardless of the particular source of state finance and its date of provision. Discount benefit arrangements in accordance with the announcements made on 27 November 1992 and 11 October 1993 apply to all state financed housing units constructed or contracted for by 30 June 1993 and allocated to persons by date of implementation of the housing subsidy scheme, that is 15 March 1994. 

In cases where the PHDB approved, under exceptional circumstances, the conclusion of individual sales and rental contracts as contemplated in section 2.6.6 of Chapter 2 of this Part of the Code, the Discount Benefit Scheme will also apply. 

The maximum discount is R7 500 

Qualifying tenants of state financed rented family housing units may buy them at a discount to a maximum of R7 500 on the selling price. If the selling price is R7 500 or less, the discount benefit is limited to the lesser amount and the sales debtor is able to acquire the unit without making a further capital contribution. If the selling price exceeds R7 500, the purchaser will be required to pay the excess. 

The discount benefit also applies to the unpaid balance owing 

• on the purchase price of such a property which has previously been sold under the National Sales Campaign, and 
• on a loan granted by former statutory bodies to a person for housing, including the unpaid balance of the purchase price and a loan granted for self-building purposes. 

A PHDB may, in its discretion, approve deduction from the selling price of the proportional cost of creating income-generating services, if satisfied that the beneficiary community in question will be able to afford to pay for the delivery of such services and thereby to defray their capital and running costs. 

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In respect of the Discount Benefit Scheme, this chapter considers: 

• Eligibility & Other Conditions: this sets out eligibility criteria by forms of tenure and house type, options in how the discount benefit scheme might be applied, cases of non-eligibility, and how tenants are identified. 
• Application: this sets out rules relating to applying for a discount benefit, and how the selling price of rental stock is determined. 
• After Approval: this sets out rules in relation to properties difficult to transfer, township registers, finance, electrical installation regulations, how the discount may be treated in municipality books, and resale and rights of pre-emption. 
• PHDB Administrative Guidelines: this sets out additional rules to assist PHDBs in their jobs. 

The rules set out in this chapter of Part 3 apply to these steps. For more information on the policy content behind the Discount Benefit Scheme, see Section 3.3 in Part 1 of this Code. 

Finally, the chapter ends with a summary of key points to remember. 

9.2 Eligibility and Other Conditions for the Discount Benefit Scheme

The following categories of persons qualify for the discount benefit:

1. Tenants: The discount benefit is available to a person who was an existing tenant (and still is an existing tenant) in occupation (or is found, after an enquiry, to be the person who should be regarded as the successor to a tenant, and thus be allowed to enter into an agreement to acquire the property), as at 15 March 1994. 
2. Existing purchasers or borrowers may receive the discount benefit but only in respect of any unpaid balance of indebtedness to the state. These include: 
   • Debtors in respect of housing loans advanced by statutory entities. 
   • Sales debtors who have already acquired properties but who still owe balances on selling prices, to Provincial Governments and municipalities. 
3. Other cases: In respect of houses which have been constructed or sites which had been provided or contracted for by 30 June 1993 : 
   • A person who establishes, to the satisfaction of the PHDB that he or she has been allocated such a property before 15 March 1994. 
   • A person under a new sale agreement entered into after 14 March 1994 only in exceptional circumstances and subject to the approval of the PHDB as envisaged in section 2.6.6 of Chapter 2 of this Part of the Code. 

   It will be necessary for persons in all categories to submit formal applications, to enable identification procedures to be instituted. 

4. No person may receive state-assisted housing more than once. 
5. A beneficiary must receive registered title to the unit concerned in ownership, leasehold, or deed of grant under Proclamation No. R293/62. "Permission to occupy" land does not constitute sufficient title to qualify for the discount benefit. 

9.2.1 Eligibility by Forms of Tenure and House Type 

9.2.1.1. Leases 

1. A tenant has no greater right than to continue with the tenancy until it is terminated plus the hope of consideration for purchase with the discount benefit. 
2. The claim procedure might well result in the identification of someone other than the tenant of record as the appropriate person to whom the property should be sold. It would then be necessary to terminate the lease before giving occupation under the sale agreement. 
3. In former “Own Affairs” cases, this may be done in accordance with the terms of the written leases. 
4. In cases where the Township Regulations previously applied, serious problems could arise because these have been repealed by the Conversion of Certain Rights to Leasehold or Freehold Act, 1988 (Act No.81 0f 1988), and nothing has been put in their place. Section 6 of that Act provides in effect for a continued statutory tenancy for Regulation 7 permit holders until varied by agreement, or terminated after due notice has been given of default in payment of overdue rent. The attention of public sector owners is accordingly drawn to the need for appropriate regulations enabling statutory tenancies of record to be terminated in circumstances where the entitlement of some other beneficiary has been established by due process. 
5. New Leases: Until such time as a new rental policy has been adopted, new leases may continue to be entered into in accordance with the provisions of circular 4/1987. 

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9.2.1.2 Flats

The first announcement of the discount benefits in November 1992 dealt only with rented family houses, which had been identified under the 1983 National Sales Campaign. The subsequent announcement of October 1993 sought to extend the discount benefit to all state financed rental housing, including “other saleable units, including flats”. The discount benefit could thus, by its nature, only be made available in respect of units, which were saleable. 

The real costs of maintenance, repair and administration of multiple-unit blocks must be taken into account as a prerequisite for a rational approach to offers for sale of multiple units. Public sector owners must be realistic about the possibility of any block being suitable for making a sectional title offer. 

• If it is not suitable, tenants should be told why they could not receive the discount benefit. 
• If it is suitable for conversion an offer should be prepared in consultation with the tenants and in compliance with statutory requirements, and making the discount benefit available. The offer should be open for a limited time, and subject to acceptance by a stated percentage of tenants. 

9.2.1.2 Council housing created without use of State finance 

The discount benefit may not be claimed by or from a municipality in respect of rented accommodation, which it has produced with use of other non-state financed sources, e.g. loans from other sources which it must continue to service. 

A person could of course in this case apply for an individual housing subsidy. 

9.2.1.4 Properties structurally unfit for transfer 

Sales with the discount benefit are made voetstoots. However, in some areas properties are structurally unsound and dangerous. For example, they may have been built on unsuitable ground, without proper foundations. It would not be appropriate to transfer such properties. The alternative provision of an equivalent house on a safe site would be very expensive, and funds are not available for this purpose. 

In such cases, municipal bodies and housing bureau or other structures concerned with transfer, are advised to formulate proposals and make representations for project financing from other sources. 

9.2.2 Application in areas of the former TBVC States and self-governing territories 

A provincial government may, in its discretion, apply the Discount Benefit rules in parts of its Province, which previously were under the jurisdiction of former TBVC States and Self-Governing Territories, subject to the following conditions: 

1. When the TBVC States and Self-Governing Territories were established the general practice was to donate State-financed housing assets to them; and they in turn have in some cases donated such assets to their housing or development corporations, or to municipalities. 
2. The balance sheets of the authorities concerned presumably show such housing assets at nominal valuations, with equivalent amounts of capital reserves on the liabilities side. The granting of the discount should be implemented through journal entries to reduce the assets and the reserves by the appropriate amounts. 
3. Some of the former TBVC States and Self-Governing Territories (and the Governments of the Provinces into which they have been incorporated) have their own schemes for discounts to promote ownership. Benefits thereunder should be deducted from the discount, which is available in terms of the aforementioned rules. 
4. Provincial Governments should take care to obtain proper authorisation under the financial regulations applicable to them (or to the other authorities concerned) for transactions contemplated in paragraphs (b) and (c) hereof. 

9.2.3 Options in the Application of the Discount Benefit Scheme 

1. Sales debtors or debtors who qualify are entitled to elect : 
   • not to claim the discount benefit and instead to continue paying under existing arrangements, including the possibility of an adjustment in the interest rate or other directive being issued; or 
   • to claim the discount benefit and to pay the balance owing thereafter with market-related interest. 
2. Tenants who elect not to purchase rented properties with the discount benefit may remain in occupation in terms of existing rental agreements, subject to the public sector lessor’s right to increase rentals and other conditions in terms of such contracts. 
3. A person who is entitled to a discount benefit in respect of a property with a top structure may not elect to apply for an individual housing subsidy in respect thereof. 

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9.2.4 In cases of non-eligibility

1. Sales debtors or debtors who have already settled their indebtedness in full do not qualify for the discount benefit. 
2. Retrospective claims for repayments: There have been cases where a sales debtor was not notified that the discount benefit was available to him, and so paid the amount owning in order to obtain transfer (either for his own occupation as owner, or for a resale). Retrospective claims for cash payments, by persons who have purchased and taken transfer without claiming the discount benefit, should generally not be entertained. However, a public sector institution may decide in its discretion to make such a repayment from its own funds. In such circumstances the relevant public sector institution may offset such retrospective payments against the gross proceeds, derived from the letting, sale or alienation of the properties which have passed to such an authority or which were acquired by a municipality by means of a loan, advance or other finance contemplated in section 14 (4) (b) of the Housing Act, 1997. 
3. Sales to tenants who do not qualify for the discount benefit, and to other persons, must be concluded in terms of the provisions of section 14 (3) (b) of the Housing Act, 1997. This means that the property must be sold in terms of the provisions of applicable national housing programme or if not possible be sold at a fair market value or if not possible be sold in the best interest of the State at a price approved by the MEC. The discount benefit will not be available in such cases, but beneficiaries may make application to the PHDB for individual subsidies in respect thereof. 

9.2.5 Tenant identification 

Great care should be taken to establish the identity and entitlement of a person claiming the discount benefit. If there appears to be any doubt or dispute, thorough and transparent enquiry procedures, including community involvement where appropriate, must be instituted.

Identification of the tenant could present problems in some cases. 

1. Property ownership and land title registration in areas previously under the jurisdiction of the Own Affairs Administrations are governed by normal common law and statutory provisions. Formal agreements of lease have been concluded and these would have included clauses prohibiting sub-letting without the lessor’s written consent. Public sector owners have Guidelines for handling cases of disputes of tenancy. 
2. In certain townships the present situation is as follows : 
   • A permit holder under regulation 6 or 8 of the Township Regulations (Government Notice R 1036 of 1968) has already acquired rights to his/her house. The Provinces are required by statute to deal with the conversion of such rights to ownership; or as an intermediate step, where a township register has not yet been opened, to leasehold or subsequent endorsement for ownership. Because a person in this category has in effect already purchased his/her property, there is no need to enter into sales agreement with him/her, and consequently the discount benefit does not apply. However, he or she is entitled to a discount benefit on any unpaid balance of a loan on the selling price, as well as of a loan granted for self-building purposes. The Province bears the cost of issuing leasehold or freehold titles to regulation 6 and 8 permit holders under the Conversion of Certain Rights to Leasehold and Freehold Act, 1988 (Act No.81 of 1988). 
   • A tenant under regulation 7 of the Township Regulations has not acquired any formal rights in the property which he or she occupies under a type of statutory tenancy. These are the cases to which the discount benefit on the selling price will apply after a sale agreement has been concluded. Transfer may be effected by the municipality without having to use the services of a conveyancer. It is in the national interest that the vast number of outstanding regulation 7 “council tenant” cases be handled in an efficient and expeditious manner. That will require systematic and transparent identification of persons entitled to purchase leased properties and thus to claim discount benefits, bearing in mind : 
     1. the large numbers of unrecorded deceased estates, marriages, informal sales, etc.; 
     2. the inadequacy of council records, which should be updated, verified and computerised; and 
     3. the need to provide paralegal assistance to a wider community which is unfamiliar with the concepts of the laws of property, contract, persons, estates, etc. 
   • Regulations under the Conversion of Certain Rights to Leasehold and Freehold Act, 1988 (Act No.81 of 1988), prescribe a comprehensive enquiry procedure to be conducted by Provinces for purposes of identification in regulation 6 and 8 cases. Processing regulation 7 cases is legally the obligation of the municipality. 
   • The Provinces are also required to handle transactions in the former South African Development Trust areas. 

9.2.5.1 Disputes around succession to be a tenant 

In determining disputes concerning the identity of the person who is to become the purchaser from the municipality, an approach similar to that contained in the Conversion of Certain Rights to Leasehold and Freehold Act, 1988 (Act No.81 of 1988) must be adopted, that is an enquiry which could recognise an existing informal contract of disposal or succession from a deceased estate, etc. in order to avoid a costly sequence of transfers. 

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9.2.5.2 Enquiry And Dispute Resolution Procedures For Application In The Areas Of Former “Black” Local Authorities 

1. a. For regulation 6 and 8 cases, the Conversion of Certain Rights to Leasehold and Freehold Act, 1988 (Act No.81 of 1988) requires the Director-General of a province (or a person designated by him/her) to conduct an enquiry into the identity of the affected site and of the claimant(s) thereto. Each of the four previous provinces had its own set of regulations under this Act. These allow for notices and hearings under a quasi-judicial procedure. 
2. b. For regulation 7 “council tenant” cases, no similar statutory provision is provided for identification and enquiry procedures. It is desirable that municipalities should apply similar disciplines. 
3. c. Investigations relating to tenancies in former black municipal areas should, like those under the Conversion of Certain Rights to Leasehold and Freehold Act, 1988 (Act No.81 of 1988) commence by establishing the situation of record as at 31 December 1988, when the repeal of the Township Regulations R1036/68 took effect. 

9.3 How to Apply for a Discount Benefit 

9.3.1 Applications 

Discount benefits do not accrue automatically. In order to commence the process, an application must be submitted by: 

• a debtor in respect of existing housing debt; and 
• a tenant in the form of a claim plus a draft sale agreement. This agreement must be finalised and signed by the seller after investigation regarding the validity of the claim, the selling price of the property and approval of the application. 

Application for the discount benefit must be made on an appropriate form, which in the case of purchases by a tenant must be accompanied by a draft agreement of sale signed by the tenant. The documents should commit such person regularly to pay charges for rates and services, and, where applicable, installments on the balance of the purchase price or loan. The debtor's application form should be along the lines of the proforma application form, Annexure A to this Chapter of the Code. The application form to purchase the property and to obtain the discount benefit is contained in Annexure B. 

Applications should be submitted to the authority, which lets or has sold the property. 

9.3.1.1 Sale agreements 

Standardised draft agreements should be kept simple and brief as possible, especially in cases where the selling price will be covered fully by the discount benefit. In this regard : 

1. The full implications of the agreement and the beneficiary’s obligations thereunder must be carefully explained to him or her before completion of the application form. 
2. Pre-emptive clauses should not be included in sales agreements. 
3. Whenever a property is sold with the discount benefit the public sector owner must give the purchaser a written statement containing an approximate estimate of the current replacement cost of the property. 
4. Transfer should be based on a sale agreement, even in those cases where the net consideration payable after the discount benefit would be nil. 

Proforma sale agreements are contained in Annexure C and D. 

9.3.2 Determining The Selling Price Of Rental Stock 

9.3.2.1 Individual houses 

1. In respect of individual houses, in the case of pre-July 1983 National Sales Campaign stock, the listed selling price (after subtracting allowances made for structural defects as contained in the directives of Circular 17/1983 introduced by the former National Housing Commission) approved by the former National Housing Commission and/or the former "Own Affairs Housing and Development Boards" is to be used. There may be added to this the proportionate cost of any subsequent improvements to the site and the top structures. For properties in former black local authority areas these should include, as provided in Circular 17/1983, township establishment cost surveying costs, water meter connection and land price at R1.50 per m2 (or such other figure as might have been fixed in a particular case with regard to infrastructural installation). 
2. In respect of individual houses, other than the pre July 1983 National Sales Campaign stock, the historic cost of the serviced site and the top structure thereon apply. 

9.3.2.2 Group houses and flats 

For flats, cluster houses, and row houses an appropriate allocation should be made of the historic cost, or the listed selling price in the case of National Sales Campaign stock, of the serviced site and the top structure thereon. This cost should be allocated in proportion to the respective floor areas of the units unless it can be shown that some other method would produce a more equitable result. Such proposed alternative selling prices, with supporting calculations, must be submitted to the MEC for consideration and approval after consultation with the PHDB.

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9.3.2.3 Sales campaign properties 

In respect of deed of sale transaction which have already been concluded under the 1983 National Sales Campaign, the discount of R7 500 on the outstanding balance must be reduced by the following discounts that have previously been granted: 

• 5% (five per cent) for participation in the sales campaign; 
• 5% (five per cent) due to the fact that, at the time the campaign was launched, the beneficiary had already resided in the property for a period of more than 5 years. 

9.3.2.4 Tenanted properties 

1. Tenanted properties must be sold voetstoots and, as a general rule, no requests for the financing of repairs or renovations, etc. will be considered. The preparation for the sale of properties occupied by tenants which are sectional title units, row houses and semi-detached units should include legal and survey work, work to meet technical requirements, e.g. separation of service supply points, and necessary restoration of the common property.
2. Care must be taken to ensure that the costs as above are not out of proportion to the value of the property, and the PHDB’s approval must be obtained before incurring expenditure on such items. All such amounts should be included in the selling price. 
3. Such expenditure by a public sector authority could be financed from the gross proceeds, derived from the letting, sale or alienation of properties which have passed to such an authority or which were acquired by a municipality by means of a loan, advance or other finance contemplated in section 14 (4) (b) of the Housing Act, 1997, on condition that the expenditure so financed may not result in exceeding the maximum inclusive benefit of R7 500,00. 
4. In cases where complete costings data are not available, a PHDB may approve approximations based on a proper analytical approach. 

9.3.2.5 Treatment Of Arrears Rentals Or Instalments 

Rentals payable by tenants are payable up to the effective date of sale, i.e. the date of signature on behalf of the public sector owner. Arrear rentals, limited to debits in respect of interest and redemption charges, may be added to the selling price before calculating the discount, as illustrated by the following examples: 

Selling price 3 500 6 500 30 000 

Arrear rentals 500 1 500 2 000 

4 000 8 000 32 000 

Discount allowable, up to R7 500 4 000 7 500 7 500 

Balance payable nil 500 24 500 

Where a sales debtor has already purchased, but is in arrear with his/her instalments, the accumulated interest plus any other debt on the loan account may similarly be added to the selling price before calculating the discount benefit. Other debt does not include arrears in respect of administration and insurance levies. 

9.3.2.6 Treatment Of Unpaid Amounts For Municipal Rates And Services 

In order to expedite matters it is desirable that the collection of municipal charges and rates (if any) should be separated from the registration of transfer. It is in the interest of provincial governments to amend applicable legislation to exempt transfers to tenants receiving the discount benefit from the requirement that a clearance certificate be lodged. The beneficiary would remain personally liable to the municipality for any service charges owing by him or her, and these do not qualify for the discount benefit. 

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9.3.2.7 Transfer costs 

1. In cases where the law requires the services of conveyancers, public sector owners should themselves handle the application, identification procedures and sale. Thereafter the services of conveyancers will be required in the usual way to register transfer, and of any mortgage bonds required. Pursuant to discussions with members of the (then) Association of Law Societies of the Republic of South Africa, (now the Law Society of South Africa), government will subsidize transfer costs to a maximum of R150 per transaction. Provision must be made in PHDB budgets for payment of such amounts. The balance of the transfer costs (if any) must be negotiated between the public sector owner, the conveyancer, and the beneficiary. 

9.3.2.8 Rent and interest accruing after date of submission of claim

Processing of a claim may take considerable time and it might be rejected. Rent (or interest on a debt) should therefore continue to be debited after a claim is received, to be written off when the claim is allowed. 

9.4 After Approval of a Discount Benefit 

9.4.1 Properties difficult to transfer 

1. Ownership of row houses and semi-detached units will generally be transferable subject to subdivision and the imposition of suitable servitudes. 
2. Public sector owners are requested to take steps for the opening of sectional title registers on those flat complexes which, are saleable in terms of the Sectional Titles Act, 1986 (Act No.59 of 1986). However, in respect of those flat complexes where it is not feasible or affordable at this stage to confer title under the Sectional Titles Act, 1986 (Act No.59 of 1986) existing leases should be honoured. 

9.4.2 Township registers 

1. In some former townships formalities for the opening of township registers in the Deeds Office may still take a considerable time to complete. Once that process is complete, transfer of full ownership will be available. In the meantime, transfer may be given in leasehold, with automatic conversion to full ownership as soon as the township register has been opened. 

9.4.3 Finance

1. After allowing the discount benefit, any balance remaining is to be financed by a mortgage loan; or the public sector owner could allow repayment by installments on the security of a mortgage bond in its favour. In granting such facilities, the public sector owner must apply suitable credit worthiness criteria.
   • Mortgage Loans: Beneficiaries will be required to bear the cost of registering mortgage bonds.
   • Public Sector Finance: Public sector owners should use their best endeavours to assist beneficiaries to obtain mortgage loans from financial institutions, employers or other sources, failing which such authorities may themselves extend credit by allowing repayment over periods appropriate to the circumstances but not exceeding 30 years, secured by mortgage bonds and bearing interest at the appropriate market rate on mortgage loans by financial institutions. In the latter event the municipality will be entitled to charge reasonable administration charges.

9.4.4 Electrical installation regulations

An exemption granted on 21 September 1994, under no. 34/2/3/1/6 by the Department of Labour from certain provisions of the Electricity Installation Regulations reads as follows :

“It is hereby certified that exemption has, in terms of Section 40(1) of the Act, been granted to:

(i) Persons purchasing premises from the National Housing Board or local authorities under the State’s Extended Benefits Scheme, on which an electrical installation exists, in respect of the obtaining of a certificate of compliance for such electrical installations subsequent to the change of ownership in terms of regulation 3(3)(b) of the Electrical Installation Regulations, 1992, to the extent that such new owners need not obtain a certificate of compliance.

(ii) This exemption is subject to the following conditions:

• The exemption applies only to transactions where the transfer of houses will not alter the occupancy thereof and the same users continue to bear responsibility for the state of the installation.
• Each purchaser accepts in writing responsibility for the electrical installation on the premises.
• The purchaser is made aware of the fact that should any addition or alteration be carried out on such installation, a certificate of compliance for the whole must be obtained”.

In maintaining the above, the reference to the “National Housing Board” in terms of the Housing Act, 1997, means the various PHDBs and the following rule applies:

1. The draft sale agreement should add wording along the following lines to the usual voetstoots clause: “The purchaser acknowledges responsibility for the electrical installation, and that should any addition or alteration be carried out thereto he or she will, in accordance with the National Electricity Regulations, be required to obtain a certificate of compliance for the whole installation.”

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9.4.5 Treatment of Discount In The Books Of Municipal Bodies

1. No cash will be paid to purchasers or borrowers.
2. The public sector owner is authorised to grant the discount benefit to the debtor by way of a reduction of the selling price, or outstanding loan balance, as the case may be. The lease will terminate and the purchase obligations commence upon the conclusion of the sale agreement.
3. On completion of an agreement the public sector owner must deal with the discount in its financial records on a basis reflecting the fact that the properties concerned are the unencumbered assets of PHDB's or municipalities in terms of section 14 of the Housing Act, 1997. The balance sheets of the authorities concerned presumably show such housing assets at nominal valuations, with equivalent amounts of capital reserves on the liabilities side. The granting of the discount should therefore be implemented through journal entries to reduce the assets and the reserves by the appropriate amount in accordance with the principles of generally accepted accounting practices pertaining to these authorities. Proper provision must be made for the inspection and audit of :
   • Applications made for the discount benefit.
   • Completed transactions.
   • Transfers.
4. Where municipalities have used their own land, application could have been made, up to 1 April 1998, (the date on which the Housing Act came into effect) to the PHDB for appropriate compensation of such land. This option is however not available with effect from 1 April 1998.

9.4.6 Consolidation of Local Authority loans for discount purposes

1. Up to and until 1 April 1998, for the purposes of granting discounts under the discount benefit scheme all loans owing by a municipality, or other authority concerned, could have at its discretion be treated as if they had been consolidated; and in such a case discounts could have been credited first against the oldest loans owing, or in such other manner as might have been agreed with the Department of Housing.
2. In many cases municipalities had serviced their loans from the national Housing Fund even though tenants did not meet their rental payment obligations. The fact that a Council's loan has been reduced in a particular case did not disqualify it from off-setting discount benefits granted by it, against consolidated loans as envisaged in above, provided that the discount could not exceed R7 500,00 per case.

The Housing Act, 1997 on 1 April 1998 extinguished the debt of municipalities towards the former National Housing Board in respect of any project or scheme, or individual dwelling which was financed by means of a loan, advance or other finance which was approved in terms of the previous housing and development legislation contemplated in section 14 (4) of the Act. The discounting of loans is therefore since 1 April 1998 no longer possible, neither required. The authorities must deal with the discount in their financial records on the basis set out in section 9.4.5 (c) of this Chapter of the Code.

9.4.7 Resale, rights of pre-emption

Sale agreements under the discount benefit scheme must not impose any right of pre-emption, nor any profit-sharing arrangement on resale of a property. Previous housing statutes require the imposition of such conditions, but make provision for granting exemptions therefrom. Exemption has largely become a standard practice. Consent to cancellation of such title deed conditions on resales should continue to be given as a matter of course.

9.5 Administrative Guidelines for the Discount Benefit Scheme

The following rules apply:

1. New Leases: Public sector owners may continue to conclude new leases in accordance with the provisions of circular 4/87.
2. Administrative legal capacity: PHDBs may provide grant finance to Provincial Administration in terms of section 8 (8) of the Housing Act, 1997, from the Provincial Housing Development Fund for the creation and financing of administrative and legal capacity to facilitate the process from the identification of beneficiaries to transfer. Where housing bureau are created, they should render services to municipalities so far as assistance is required.
3. Housing Subsidies Database: Whenever a transaction is entered into in terms of the provisions of the discount benefit scheme, that fact must be entered into the housing subsidy database immediately.
4. Communications: The discount benefit to promote home ownership has wide-ranging implications for persons occupying state financed family housing units. Public sector owners are required to communicate the benefits and procedures to potential beneficiaries.

9.6 Termination of Discount Benefit Scheme

The Housing Act, 1997, in section 17, provides that the MEC may determine a cut off date for the lodgement of claims for the granting of the discount. This date shall not be later than a date determined by the Minister, after consultation with the MEC. Such data is still to be determined by the Minister.

9.7 Key Points to Remember

Remember:

1. The purpose of the Discount Benefit Scheme is to assist tenants to acquire State financed rental housing, and to assist existing debtors with the settlement of the balance still owing.
2. The discount benefit relates to State financed property which was first occupied before 1 July 1993, and to units or stands contracted for by 30 June 1983, if allocated to individuals by 15 March 1994.
3. The discount of R7 500, irrespective of household income, is applied to the selling price or to balance owing.
4. No new money is required and consequently there is no need for funds prioritisation by the PHDB.
5. Applications are submitted to the public sector authority that lets or has sold the property or issued the loan.

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