Mc Naught & Co
Property Practitioners Act – The new law
Some new legislation will bring far-reaching changes to the property industry as it will be replacing the Estate Agency Affairs Act, 1976 (“The old Act”).
If you are an estate agent, you will likely already be aware that the Property Practitioners Bill was signed into South African law on 2 October 2019 and we can expect that it will become operational within the next few months. However, Estate Agents are not the only ones who this bill applies to.
The Act broadens the scope of an “estate agent” under the Old Act. A “property practitioner” in section 1 includes a bond broker, people who provide bridging finance, a home inspector, a facilitator of an agreement of sale or lease (including a Homeowners’ Association), a seller of timeshare or fractional title, a property manager and a property developer. Digital portals are also specifically included therefore Property 24 and Private Property are also ‘property practitioners’ for purposes of The Act.
The Act does not apply to a person who does not carry out these functions in the ordinary course of his business, a person who sells his own property, attorneys, candidate attorneys and sheriffs of the high court.
This definition will bring a lot of uncertainty into our law as a broad scope of individuals and service providers will now be obliged to comply with The Act, with little regard to the practicality thereof.
Other noteworthy changes brought about by this Act are as follows:
The Act will establish the Property Practitioners Regulatory Authority. This will replace the Estate Agency Affairs Board. Its functions will be to:
• Regulate property practitioners
• Protect, educate and inform consumers
• Educate, train and develop property practitioners
• Ensure the property sector is transformed
Chapter 4 of the Act confirms that the Transformation Charter, which was introduced in 2017, applies to property practitioners. This means that property practitioners will have to comply with broad-based black economic empowerment and employment equity legislation and policies. A property sector transformation fund will be established and funds will be used to assist the previously disadvantaged as well as to provide training and development.
The property sector research centre will also be established with the aim of being the central knowledge repository for the property sector.
Chapter 5 of the Act deals with Compliance and Enforcement. The Act grants inspectors far-reaching powers and allows them to search the business premises of property practitioners without prior warnings and without first having obtained a search warrant.
However a prior warning will be provided by the inspector where a private residence is the object of the inspection. The inspector will be entitled to make copies of any fidelity fund certificate, business records, or documents. With a search warrant the inspectors will be able to confiscate records or documents of the property practitioner.
The property practitioners’ regulatory authority (“The PPRA”) may deal with complaints lodged against property practitioners relating to financing, marketing, management, letting, hiring, sale and purchase of property. The PPRA can refer the dispute to adjudication or mediation and time limits are set out in the Act.
It is important to note that the defects disclosure form will now be mandatory when entering into a deed of sale and a lease agreement. If this is not adhered to it will be deemed that the seller did not disclose the defects in the property to the purchaser. Furthermore, failure to obtain it will be an offence on the part of the property practitioner.
Chapter 6 deals with funding. This money will come from Parliament, from fees paid by Property Practitioners, from interest generated from the investment of surplus funds, and any other source. The Minister will have final say as to how the funds will be allocated and utilised.
Every property practitioner must have a fidelity fund certificate. However application for the fidelity fund certificate will only need to be made every three years, unlike the current situation where a FFC must be renewed annually.
You will not be entitled to act as a property practitioner unless you have a valid FFC. The new act states that if money was received by the property practitioner without him being in possession of a valid FFC, then he must refund the money received during the time of the contravention. This means the seller would be able to reclaim the commission if the seller found out about this at a later stage. If the money is not repaid it is an offence and you will be liable to pay a fine or to imprisonment of up to 10 years.
An applicant for an FFC will need to have a tax clearance certificate, and if a juristic person, a valid BEE certificate.
If a property practitioner commits an act of insolvency, or is insolvent, or is placed under liquidation, that property practitioner will immediately be disqualified from holding a FFC. This could mean that the property practitioner could not be entitled to any unpaid commission as they will not be in possession of a FFC at the time the commission is paid.
Conveyancers will also not be permitted to make payment of commission without a certified copy of a valid FFC.
In terms of the new Act, property practitioners are not allowed to oblige consumers to use specific service providers, including attorneys, although this has been the position under the existing Act as well.
Candidate Property Practitioners will not be entitled to draft or amend deeds of sales or lease agreements, and a property practitioner will not be entitled to receive their commission if they allow this to happen, regardless of whether or not they were aware of this at the time.
The cost of drafting a sale or lease agreement must be for the sellers/developers account in terms of the Act.
It is important to familiarise yourself with this new Act if you are a property practitioner for purposes of the Act. We encourage you to visit us at one of our offices for a cup of coffee so that we can assist you in becoming familiar with the new controlling legislation.