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24 Apr 2017

PROPERTY PRACTITIONERS BILL

The Estate Agent profession is currently regulated by the Estate Agency Affairs Act 112/1976. The Government has decided to interrogate this Act and to replace it with something which the Government views to be more suitable. The Government has published a draft of the proposed Act for public comment under the title of The Property Practitioners Bill. The Bill comprises over 100 pages so it not possible to cover all of it in this article. All we will do is touch on some of its highlights (or lowlights depending on your point of view)!

Herewith then the items we thought worthy of notice:

  1. The definition of Property Practitioner includes more professions/business enterprises than the definition of estate agent in the current Act. The additional people who will now be roped into the same profession as estate agents are:
    1. Anyone who sells “business undertakings”. It seems that business brokers will now be included.
    2. Anyone who provides or markets bridging finance.
    3. Anyone who provides or markets bond broking.
  2. The objects of the Bill include several paragraphs providing for the transformation of the entire “property market” and for the inclusion of historically disadvantaged individuals.
  3. A Property Practitioners Regulatory Authority is to be established and will become a public entity (like Eskom and others) wholly owned by the Government. It will be governed by a Board to known as the “Board of Authority”. The entire Authority is accountable to a Minister. In the current Act the Board of Directors are appointed by a Minister but with certain restrictions on that Power. In this regard the current Act directs that the Board must be made up of 15 members. Five must be appointed from the estate agent industry; five from consumer organisations and five from related professions such as legal, financial, property owners and developers. That is now out the window and the Minister can appoint anybody he/she likes subject only to them having one of the following abilities, namely sufficient financial expertise; relevant legal experience; sufficient experience as a property practitioner; sufficient experience in promoting consumer interest and sufficient experience in property management or financing. There is no requirement that a certain minimum should be from the estate agent’s profession. The Board must of course be representative of race, gender and disability. The functions of the above Board include to advise the Minister on the state of transformation of “the market” and to appoint a CEO (who in turn will appoint employees)
  4. A Property Practitioners Ombud is to be established. The Ombud will of course be appointed by the Minister and will have an  office and staff  to carry out the duties of the Ombud which is effectively to consider and dispose of complaints by members of the public against Property Practitioners. The decision of the Ombud is equivalent to a Magistrate’s Court Order. The Ombud can also issue fines. It is interesting to see that if Property Practitioners agree to an inter property practitioners dispute it can be adjudicated by the Ombud.
  5. The concept of compliance notices has been created. It appears that the Minister will publish a list of improper behaviours on the part of Property Practitioners which will be broken down into contraventions of a minor nature and contraventions of a substantial nature. If an inspector of the new authority believes there has been a minor nature contravention the inspector may issue a compliance notice giving the Property Practitioner a reasonable period to comply with the notice. The notice can include the imposition of a fine. Anyone who refuses to comply with such notice commits a crime and be prosecuted. The bill does not indicate what will happen if it is a contravention of a substantial nature and that is left hanging. Presumably straight to criminal prosecution?
  6. A Property Practitioners Fidelity Fund is to be established. It will absorb the current fidelity fund of estate agents. It appears that Property Practitioners will have to pay a fee to this fund annually. The fund is to be managed by the Property Practitioners Regulatory Authority but it can be “outsourced”! Significant opportunities here for corruption and theft.
  7. Room is created for the authority to give “grants” for several purposes including “transformation of the property sector”. Lots of room for corruption and theft here.
  8. Property Practitioners must as with the current act annually apply for a Fidelity Fund certificate and pay the prescribed fee. Certificates will not be issued unless the Property Practitioner is in possession of a valid tax clearance certificate and a BEE certificate. It is not clear what the certificate must contain. What qualifications will be required of the various categories of Practitioners is not stipulated but will probably be different.
  9. A Property Practitioner cannot enforce the recovery of remuneration (commission) unless the Property Practitioner and anyone employed by the Property Practitioner as a property practitioner has a fidelity fund certificate. This reverses improvements made to the current act and could be logistically very difficult for a large agency to comply with. If the seller has paid the commission already the seller is entitled to a refund (this reverses the current law). Operating without a certificate and/or failing to repay commission wrongly collected is an offence. A Fidelity Fund Certificate can be withdrawn by the Authority or the Ombud on good cause shown. A manager of a Property Practitioner business must also have a Fidelity Fund Certificate.
  10. All records must be kept for 10 years but may be kept electronically.
  11. Conveyancers will not be permitted to pay commission to a Property Practitioner unless they have been supplied with a valid Fidelity Fund Certificate by the Property Practitioner. It is not clear whether this includes the company and the individual Property Practitioner or what.
  12. The Minister will prescribe Indemnity insurance which Property Practitioners must take out and maintain.
  13. Property Practitioners may not enter into any arrangement whereby a consumer is obliged or encouraged to use a particular service provider. Any person who renders any service in contravention of this rule is not entitled to remuneration and must refund any money received. It seems that a Conveyancer who has “an arrangement” with an estate agent to receive referrals of conveyancing could find themselves deprived of their fee. Failure to repay is an offence. This is going to affect agreements between estate agencies and mortgage originators and the like also.
  14. No agent may receive commission from a sale until it is registered.
  15. Franchisors of estate agencies can be held liable for the misconduct of their franchisees. This is extraordinary.
  16. Property defects disclosure forms by sellers will become mandatory and no mandate may be taken by from a seller without this document. It must be given to the purchaser and form part of the sale agreement.
  17. The maximum criminal sanction for violating the proposed law is imprisonment for 10 years.

This summary reflects the Bill as it stands. Changes could and probably will be made after public comment is received.

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