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Section 20(1) of the Property Practitioners Bill states that:

“The Property Sector Transformation Charter Code, as amended from time to time, applies to all property practitioners”

But how will the code be enforced on the industry? Well, this will be done in an indirect but very effective way. From the time that the Property Practitioners Bill becomes law, one of the requirements for the issue of a Fidelity Fund Certificate will be that the Property Practitioner is “in possession of a valid BEE certificate.” (Section 50(a)(x)). To get this BEE certificate you will have to comply with the Code.

This Property Sector Code was published in the Government Gazette on 9 June 2017. Its main purpose is to set out a path for transformation in the property sector. In the preamble it states that the Code:

• Constitutes a framework and establishes the principles upon which Broad Based Black Economic Empowerment (B-BBEE) will be implemented in the property sector; and
• Establishes targets and qualitative undertakings in respect of each element of B-BBEE; and
• Outlines processes for implementing the commitments (to transformation) contained in the code and creates mechanisms to monitor and report on progress.

It is therefore of vital importance for all owners of estate agencies to know what is happening here so that they can start preparing themselves for compliance. It will also be of interest to all estate agents to know of these big changes that will be taking place in the industry.

The Code starts by setting out the challenges facing the property sector, starting with situation created by the Native Land Act of 1913, which denied black South Africans the right to the ownership of more than 93% of the productive land in South Africa. It sets out the sad situation that we are faced with in the property sector where property ownership is predominantly white and where black people are underrepresented as employees and business owners in all parts of the property sector.

The code also seeks to redress gender inequalities in the sector, especially in respect of black women.

Amongst the objectives of the code are:

• To promote economic transformation, especially as regards ownership and control and management of businesses, and make the sector more representative;
• To unlock obstacles to property ownership by black people;
• To promote development and encourage investment, especially in under resourced areas;
• To support micro and small enterprises;
• To improve skills development;
• To facilitate the accessibility of finance;

EXEMPTED MICRO ENTERPRISES

The Code will not apply equally to all businesses in the property sector. The Code recognizes that it will be more difficult for smaller businesses to comply and lower levels of compliance will be required by these smaller businesses. Businesses falling below certain thresholds are totally exempted from specific compliance with B-BBEE requirements.
Property enterprises whose businesses are “asset-based”, I assume this to mean enterprises which trade in property, are exempt if the net assets of the business are less then R80 million. Enterprises who are services based, like property management companies, will be exempt if the turnover is less than R10 million.

Estate agencies however, get a special mention and they are only treated as Exempted Micro Enterprises (and exempt from the B-BBEE requirements) if the annual turnover is less than R2.5 million.

QUALIFYING SMALL ENTERPRISES

Assuming your estate agency has an annual turnover of more than R2.5 million, the next category of enterprises that you might fall into is the category of “Qualifying Small Enterprises”. These are enterprises with assets of less than R400 million for asset-based enterprises and an annual turnover of less than R50 million for service-based enterprises.
But once again, estate agencies get a special mention, an estate agency business will fall into this category if it has an annual turnover of less than R35 million.

So, for an estate agency to fall into the category of Qualifying Small Enterprises, it must have an annual turnover of more than R2.5 million, but less than R35 million. I think that a lot of estate agencies will fall into this category.

GENERIC CATEGORY

Estate agencies with an annual turnover of more than R35 million will fall into the Generic (unlimited) category. Other service-based property businesses will only fall into this category if they have an annual turnover of more than R50 million.

START-UP ENTERPRISES

A new business will be treated as an Exempted Micro Enterprise for the first year. If it is going to tender for contracts above a specific value during this period, it will however need to submit a scorecard for a Qualifying Small Enterprise, or a Generic scorecard, depending on the value of the contract.

THE SCORECARD (section 10)

Your B-BBEE compliance is determined on the basis of a scorecard. There is a slight difference in the weighting on the scorecards for Qualifying Small Enterprises and Generic Enterprises (to make it easier for the smaller enterprises) but the emphasis on the various elements remains similar. The factors that are measured in the scorecards are:

The category of economic development is unique to the property sector. Under this heading the extent to which an entity contributes towards development in under resourced areas is measured.

The maximum score possible is 105 points for QSE’s and 117 points in the Generic category. If you exceed targets you can also qualify for bonus points.

Scores for each category are calculated based on set formulas and the outcome of the calculation will determine your level of compliance.

OVERSIGHT

The implementation of the code is to be overseen by the Property Sector Charter Council. Entities within the property sector will be encouraged to contribute towards funding the Charter Council and this will be recognised as part of Enterprise Development or Supplier Development. You can therefore buy some points by contributing to the costs of the Council.

Qualifying enterprises (including all estate agencies with a turnover of more than R2,5 million) will have to submit a B-BBEE report, a certificate and a scorecard, verified by an accredited BEE verification agency, to the Charter Council on an annual basis. They will then receive their BEE certificate.

KEY PRINCIPLES IN MEASURING B-BBEE COMPLIANCE

• Substance takes precedence over legal form.
• Misrepresentation will be dealt with in accordance with the B-BBEE Act.
• The splitting of enterprises to enable them to qualify in lower category may constitute an offence.
• All representations about compliance must be supported by suitable evidence.

APPLICATION OF THE CODES

How this code is to be applied and how the scores are to be calculated is very complicated and requires specialist knowledge of the B-BBEE Act. That is where the BEE verification agencies will come in.

An enterprise will be awarded points on their scorecard for compliance with different categories. The closer you are to your targets, the more points you will earn. You also have the possibility to earn bonus points if you exceed your targets. Once your scorecard is marked, it will determine at which level of B-BBEE compliance the enterprise is at.

Below you will find the targets that have been set in the various categories on the scorecard. Compliance to this level will give you a score in excess of 100%. You will then qualify as a level 1 Contributor. The levels go right down to Level 8, and if you score less than 30 points, you will be treated as a Non-Compliant Contributor.

OWNERSHIP

In this section, the targets for ownership of property sector companies that render services (like estate agencies) are stated as follows:

27% ownership by black people

10% ownership by black women

3% ownership by “broad-based ownership schemes and/or designated groups”

3% ownership by “new entrants”.

To score in this category, property owning companies are given a period of 10 years to achieve 50% black ownership, in annual increments.

MANAGEMENT CONTROL

The targets that are set in the code for Management Control of estate agencies are the following:

50% of voting rights must be held by black people at board level, of which one half must be held by black females;

50% of the executive directors as a percentage of all executive directors must be black and half of these directors must be black females;

60% of the executive management must be black, and half of these must be black females.

The code specifically defines the term “management” in the context of an estate agency. Somebody is part of management if he is earning more than R360 000 per year and is “possessing a level of authority”. This means that for someone to qualify as a manager for the purposes of your scorecard, the person will have to earn no less than R30 000 per month.

In generic enterprises, for someone to qualify as a senior manager, they must earn more than R450 000, for someone to qualify as a middle manager, they must earn between R225 000 and R450 000 per annum and a junior manager must earn between R225 000 and R150 000. These requirements obviously put in place to prevent window dressing. If you are going to call an employee a manager, they will need to have a salary that goes along with the title.

EMPLOYMENT EQUITY

The employment equity targets for estate agencies are as follows:

50% of all agents must be black and 35% must be black females.

35% of the total management team must be black and 18% must be black females. (Remember, these people need to earn decent salaries – as stated above – to qualify as managers.)

30% of the administrative team must be black.

It seems as if there’s quite a bit of overlap between the categories of Management Control and Employment Equity, and you may be able to earn points in both categories for the same thing.

SKILLS DEVELOPMENT

Under this heading, targets are set for enterprises to use a certain percentage of their income for skills development, including learning programs, apprenticeships and internships. An agency will need to spend 5% of its expenditure on skills development to qualify for the full quota of points in this section.

ENTERPRISE AND SUPPLIER DEVELOPMENT

Under this heading, targets are set for enterprises to use the services of other entities that are BEE compliant.

SOCIO-ECONOMIC DEVELOPMENT

Under this heading, you are awarded points if you reach targets for contributions to socio-economic development projects that benefit black groups and promote transformation and development.

ECONOMIC DEVELOPMENT

Under this heading, enterprises are encouraged to invest in economic development projects, especially those in under resourced areas.

WHAT LEVEL OF COMPLIANCE IS REQUIRED TO OBTAIN A “VALID BEE CERTIFICATE”?

My understanding of the law at this stage is that it will not matter what your level of compliance is, and that all you will have to do is go through the process to work out your scores and then submit that to the Charter Council. The Charter Council will then issue you with a BEE certificate. This certificate might reflect that you are completely non-compliant. The certificate will however be a valid BEE certificate and on the strength of the certificate you will qualify for your Fidelity Fund Certificate.

This process would therefore just help the Charter Council to assess the current situation within the property sector as regards transformation.

I’m confident however that this situation will not last forever. My prediction is that, in terms of the Regulations to the Property Practitioners Act, the Minister will regulate that a “valid BEE certificate” will have to reflect that you qualify at a certain level of compliance. At that stage things are going to get very interesting in our industry. I also predict that this is going to happen sooner rather than later.

Miltons Matsemela

Deon Welz

Selling property, particularly your own home, is one of the more stressful events in life. Will you get the right buyer? The best price? What if it all goes wrong?

Then an offer comes in that is acceptable, but not perfect. If for example there is a bond clause and the buyer’s bond application fails a month down the line you’ve lost all that valuable marketing time. You’ll never know whether you just missed the “perfect offer” while your buyer filled out bank forms and got FICA’d for the tenth time.

Relax; there is an answer – the “72-hour clause” often found in standard sale agreements. We’ll cover what the clause means, how it works, when you need it, and what should always be covered in it, with a note also for property buyers.

You put your property on the market and an acceptable but not-perfect offer comes in. On the “a bird in the hand is worth two in the bush” principle you want to accept the offer even though it’s not ideal.

Perhaps it’s not perfect because it’s subject to a suspensive condition – common ones give the buyer time to sell his/her current house or to obtain a bond. In both scenarios your sale will fall through if the buyer is unsuccessful within the stated time, and if that happens you are back to square one after a long and fruitless delay. Bear in mind that that delay could be a protracted one depending on what your sale agreement actually provides – normally no less than 30 days to get a bond, sometimes several months to sell an existing house. That’s a lot of very valuable marketing time lost – and you’ll never know for sure whether you just missed out on that “perfect offer”.

The “72-hour clause” and what it does

This is where the “72-hour”, “continued marketing” or “escape” clause comes in handy.

In a nutshell, it allows you to continue marketing your property until suspensive conditions are met. If your marketing pays off and an unconditional offer does come in, you can give your existing buyer 72 hours’ notice to match it. So the buyer would have an opportunity to make the sale unconditional – either by waiving (abandoning) the condition or by fulfilling it.

If the buyer fails to do whatever the clause requires within the 72 hours, you are clear to accept the new offer. If on the other hand the buyer does perform in time, the existing sale immediately becomes fully binding and the transfer process can get underway.

A note for buyers

The clause is usually there for the seller’s benefit so perhaps avoid it when you can. But if it’s a choice between your offer being accepted or not, bear in mind that having a signed sale agreement at least gives you a solid base for a full bond application and/or a concerted effort to finalise your own house sale.

Just be ready to react quickly if the seller does indeed give you the 72 hour notice – you don’t want to be rushing around in a last-minute panic.

Buyers and sellers – check the wording!

Although 72-hour clauses are common in standard sale agreements, the exact wording can vary substantially, and may need tailoring to meet your specific needs. You might for example want to be given proof of availability of funds together with a bond clause waiver, or proof that the sale of the buyer’s house is a viable one – every situation will be different.

Apart from everything else, make sure that –

• The 72 hour period specifically excludes Saturdays, Sundays and Public Holidays (religious holidays too if important to you),
• You can extend the 72 hours by mutual agreement if you want to,
• There are clear requirements for the method and timing of giving notice and of waiving conditions, and
• You aren’t binding yourself to anything else that could turn around and bite you down the line.

Delete the clause if it doesn’t apply.

As always, have your lawyer check it all for you before you sign anything!

“There’s no such thing as a free lunch” (Economist Milton Friedman)

You accidentally pay a large amount of money to the wrong person. Or perhaps you overpay the right person. That sort of mistake happens all too often in these days of banking apps and online payments, and the question is – what can you do if the recipient point blank refuses to repay you?

A lot of money could be riding on the answer, and fortunately our law provides a remedy in the form of an “unjustified enrichment” claim.

We look at a recent High Court case involving R861,940 that was paid out to a couple when a bank’s “remote banking app” malfunctioned. Read on for a discussion of the Court’s decision, and of what you must be able to prove to succeed in such a claim.

In these days of online banking and electronic payment, it’s not uncommon to find out to your horror that you have made a payment to someone in error, either to the wrong recipient or in an incorrect amount. If that happens to you and the recipient refuses to pay you back, what can you do about it?

The other side of the coin of course is whether the recipient of an unexplained and unexpected bank account credit can safely go ahead and spend the windfall (the answer in a nutshell is very strong “no” – if there are indeed any free lunches in the world, this is unlikely to be one of them!).

A recent High Court judgment sets out the requirements for a claim based on “unjustified enrichment”.

A banking app duplicates payments of R861,940

• A couple were the happy beneficiaries of a malfunction in their bank’s “remote banking” app
• In effect they received duplicate transfers into their two accounts totalling R861,940
• The bank duly sued them for return of the money on the basis that they had been “unjustifiably enriched” at its expense
• Initially the couple denied that any duplication had taken place, but at trial they dropped their denial, claiming instead to have repaid the bank in cash
• The husband’s story was that he had paid a bank employee, since deceased, who had put the cash into a safe “in case a claim was made”. He was unable to say how much money had been handed over, he could not give dates, and no receipts were requested or given. Nevertheless his evidence was accepted by the trial court and the bank’s claim failed.
• However on appeal to a “full bench” (a “full court” of three High Court judges, sometimes more), the husband’s version was rejected as “inherently improbable”, and the couple was ordered to repay the bank together with interest and legal costs.

What must you prove?

The requirements for an unjustified enrichment claim are –

1. The recipient has in fact been enriched by receiving the money (it needn’t be money, it could for example be an asset of some sort)
2. You have been “impoverished” by the transfer
3. The recipient’s enrichment was at your expense
4. The enrichment was legally unjustified.

Once the couple admitted receiving the money without a legal basis, held the Court, the onus shifted to them to prove that there was no enrichment. So their failure to prove repayment was the end of their case.

Don’t despair if the facts of your case don’t tie in fully with the above requirements – our law may have other remedies for you. Ask your lawyer for help.

“An income tax form is like a laundry list – either way you lose your shirt” (Comedian Fred Allen)

Expats have until now enjoyed a tax exemption in respect of foreign remuneration earned, provided they meet requirements as to time periods worked overseas. The exemption will however be partially removed with new legislation recently passed.

We look at current requirements for exemption, what the new restrictions on the exemption will be, whether they will affect you, when they will take effect, and what you should think of doing about it.

Note: If you yourself don’t employ a working expatriate, or if you aren’t yourself an expat but you know someone who is – a relative, friend or colleague perhaps – please think of passing this article on.

This article is important to you if you are either a South African working abroad or an employer of one. If you don’t fall into either of those categories, but know someone who does, please think of passing this on.

As an employee earning foreign remuneration (salary, leave pay, bonuses, allowances, commission etc), you currently enjoy an uncapped tax exemption (on that remuneration only, not on other foreign income) provided that you work overseas –

• For more than a total of 183 days during any 12 month period, and
• More than 60 of those days are consecutive.

That however is set to change from 1 March 2020, when only the first R1m p.a. of your earnings will be exempt – you will pay tax on anything over that. With the Rand’s weakness showing little sign of abating, a lot of expats and their employers are going to be affected.

Are you a “tax resident”?

Only “tax residents” are affected, so the first thing you should establish is whether you are still a tax resident or not. That’s not always easy, so take professional advice in any doubt.

To illustrate some of the complexities involved, both physical emigration/relocation and “financial emigration” are different concepts to “tax emigration”. Moreover the Income Tax Act’s tests for tax residency are hardly a model of clarity – you are a “resident for tax purposes” if you are either an “ordinary resident” or a resident in terms of the “physical presence test” –

1. You are, says SARS, an “ordinary resident” if South Africa is the country to which you “will naturally and as a matter of course return after [your] wanderings’, your “usual or principal residence”, or your “real home”.
2. Even if you aren’t an “ordinary resident”, you will still be a resident under the “physical presence test” if you are physically present in South Africa for more than –
   1. “91 days in total during the year of assessment under consideration; and
   2. 91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
   3. 915 days in total during those five preceding years of assessment.”

Under the physical presence test however if you are outside the country for a continuous period of at least 330 days you are not regarded as a tax resident.

Should you “tax emigrate”?

If you are indeed a tax resident, don’t think of changing that status without taking full advice. “Tax emigration” and “financial emigration” are complicated processes and full of pitfalls.

For example you could be entitled to foreign tax rebates or other relief on your taxable (i.e. +R1m) foreign earnings, or there may be other benefits to remaining a tax resident. So it is important to have an expert look at your specific situation and determine what is best for you overall.

The big thing is to be aware that change is coming. Some long-range planning is the only way to be certain that there are no unpleasant surprises waiting to spring out on you down the line.