15 January 2020 by and Corporate & Commercial Alert

The Property Practitioners Act: What is it all about?

The President has recently signed into the law the Property Practitioners Act 22 of 2019 (Act). The date of commencement of the Act is still to be determined. However, those in the property industry ought to start getting to grips with the provisions of the Act as soon as possible.

The Act has repealed the Estate Agency Affairs Act 112 of 1976 (EAA Act) in its entirety. It did so to achieve three primary objects:

  1. to address the slow transformation in the property sector;

  2. to integrate and consolidate all role-players within the property sector under one umbrella statute; and

  3. to address the deficiencies in what has been a largely ineffective system of monitoring estate agency matters and protecting consumers and their trust funds.

Who is a “Property Practitioner”?

In order to achieve its objects, the Act uses the phrase “property practitioner” which is much broader than an “estate agent” under the EAA Act. A property practitioner is any person who, for the acquisition of gain, directly or indirectly, on the instructions or on behalf of another:

  1. sells, purchases, manages or publicly exhibits for sale any property or business undertaking;

  2. leases or hires or publicly exhibits for hire any property or business undertaking;

  3. collects or receives money payable for a lease;

  4. provides, procures, facilitates, secures or otherwise obtains or markets financing for or in connection with the management, sale or lease of a property or business undertaking; and/or

  5. renders services as an intermediary to effect the conclusion of an agreement to sell or let a property or business undertaking (except where this is not done in the ordinary course of the person’s business; where it is done by a natural person in their personal capacity, or where the person is an attorney, candidate attorney or sheriff).

Thus, the definition (and thus the application of the Act), extends well beyond estate agents. It notionally also includes auctioneers, property developers, property managers, franchisees, providers of bridging finance and bond brokers (aside from financial institutions) and, for purposes of certain provisions all directors, trustees, and/or employees of property practitioners.

Anyone who falls within the ambit of the definition of a “property practitioner” is required under the Act to obtain a certificate issued by the Fidelity Fund on an annual basis. Without a valid certificate, a property practitioner may not render services or receive fees. In fact, conveyancers are prohibited from paying any money to a property practitioner without receiving a copy of that property practitioner’s valid Fidelity Fund certificate.

The Fidelity Fund’s primary purpose is to reimburse persons who suffer pecuniary loss by virtue of:

(1)   theft of trust money by property practitioners; or

(2)   failure by property practitioners to comply with the provisions of the Act requiring a separate trust account and proper accounting records.

Property practitioners are also required to maintain indemnity insurance (to the extent required by the Minister of Human Settlements); comply with a property practitioners’ code of conduct (to be prescribed by the Minister of Human Settlements); and to provide certain mandatory disclosures to potential purchasers and lessees. These obligations are all designed in order to ensure that consumers are protected. Any property practitioner in contravention of the Act will be required to repay any fees received for a property transaction, and may be issued with a fine. Furthermore, any person convicted of an offence in terms of the Act is liable to pay a fine, or to imprisonment for up to 10 years.

The Property Practitioners Regulatory Authority

The Act has established the Property Practitioners Regulatory Authority (Authority). The intention is for the Authority to replace the Estate Agency Affairs Board. The Authority is required, among other things, to ensure compliance with the Act; to regulate the conduct of property practitioners; to implement measures to transform the property sector, and to conduct campaigns to educate property practitioners and consumers.

In terms of the Act the Authority is given far-reaching enforcement powers. It is entitled to appoint inspectors who are authorised to enter, inspect and search any property practitioner’s business premises without notice (aside from private residences, for which a warrant is required), and to request any document from a property practitioner. In the event of a contravention of the Act, the Authority is entitled to issue a compliance notice and a fine to the relevant property practitioner.

It is also envisaged that the Authority serve a dispute resolution function, by receiving complaints against property practitioners, referring disputes for mediation and/or appointing independent adjudicators to adjudicate complaints.

To achieve its object of being a consumer-focused piece of legislation designed to protect consumers in the property industry, the Act obliges property practitioners to deliver a “disclosure form” to a seller/lessor before concluding a mandate, and to a purchaser/lessee before making an offer. The disclosure form must be signed by all parties and attached to the sale or lease agreement. If no disclosure form is signed and attached, the Act provides that the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser. The Act also provides that the relevant lease or sale agreement must be in the official South African language requested by the purchaser or lessee, and obliges the Authority to “conduct campaigns to educate and inform the general public of their rights in respect of property transactions and property practitioners of their functions, duties and obligations”.

The Act has as one of its objects the transformation of the property sector. The Authority is mandated in terms of the Act to implement and assess measures to progressively promote an inclusive and integrated property sector. It is required to establish a Property Sector Transformation Fund which applies to all property practitioners, which must be used by the Authority for transformation and empowerment programmes, including programmes to promote black-owned firms; to encourage the participation and work-readiness of historically disadvantaged persons in the property sector; and to promote consumer awareness of property transactions and business undertakings. The Act further provides that Government must use the services of property practitioners who comply with BBBEE and employment equity legislation.

Any person may apply to the Authority to be exempted from any provision of the Act, by submitting an explanation of the reasons for the application and any supporting documents. Although the Act does not stipulate the grounds for the granting of exemptions, it does provide certain relevant considerations. For example, the Authority may consider whether the granting of an exemption is likely to negatively impact the general public, competition in the property sector, consumers’ rights or the objects of the Act.

Recommendation

The Act is significantly stricter and more far-reaching than its predecessor, the EAA Act. In light of the serious consequences of non-compliance with the Act, any person who may fall under the broad definition of “property practitioner” would be well-advised to seek guidance from a legal practitioner and ensure strict compliance with the provisions of the Act.

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