As mentioned in my last Newsflash of 2018, this Bill is about to become the law that will replace the Estate Agency Affairs Act, that has regulated the profession since 1976. The Bill has been passed by Parliament and now only has to pass through the National Council of Provinces before it is signed into law by our President. I see no obvious obstacles that will prevent this from taking place before our elections in May. The new Act will substantially change the profession.
The new Act is a substantial piece of legislation, comprising 38 pages and 77 sections. It deals with all aspects of the profession. It is therefore impossible to give it proper coverage in a single Newsflash.
My intention is therefore to break the Act up into sections and to deal with each part in a separate Newsflash. This is the start of our journey.
STATED OBJECTIVES OF THE ACT
The stated objectives of the Act go far beyond the old legislation and are ambitious to say the least. They are stated in Section 3 and can be summarised as follows:
- To regulate “Property Practitioners” – this term is defined later on;
- To replace the EAAB with another body, the Property Practitioners Regulatory Authority, which will have wider jurisdiction over more players in the property industry;
- To better protect consumers;
- To provide for internal dispute resolution in the property market;
- To provide for education and training;
- To regulate licensing of Property Practitioners;
- To create a just and equitable legal framework for the industry;
- To transform the industry by promoting the interests of historically disadvantaged individuals and small and medium sized enterprises;
- To create a fund for transformation;
- To promote home ownership in the affordable and secondary housing market;
The Act starts off with its usual flowery introduction and moves swiftly on to the section which defines terms which are used in the legislation. The definitions make it clear that we will still be dealing with issues relating to “candidate property practitioners”, a “code of conduct”, the Property Practitioners Fidelity Fund, (previously the Estate Agents Fidelity Fund), Fidelity Fund Certificates and Registration Certificates.
More notable however is the definition of a “Property Practitioner”. It is with this definition that the scope of the Act is widened to include a whole host of other people in addition to estate agents. The definition extends over one and a half pages and includes all of those who were previously regulated under the old act.
The expanded definition of Property Practitioner means that commercial brokers who sell businesses will also be included under the umbrella of this Act (although the fact that the Act applies to them is soon forgotten by the draftsman), so will mortgage bond brokers and people who provide bridging finance (unless they work for registered financial institutions).
Also included are property valuers, people doing home inspections for purchasers before a sale, property managers, agents involved in the selling of timeshare and fractional ownership, and anyone else who facilitates or acts as an intermediary with the primary purpose of bringing about a sale of a property or a business.
The definition goes on to include people who manage the business of a Property Practitioner. This will obviously include office managers. It might also include personal assistants.
The definition also specifically includes digital portals that publicly exhibit properties (or businesses) for sale or for rent using electronic means. The definition will therefore bring Private Property and Property 24 under the ambit of the Act. It also includes companies that receive rentals on behalf of others. This might include PayProp.
Also included are employees of Attorneys who act as estate agents, even though they are also covered under the Attorneys Fidelity Fund.
Finally the definition also purports to include persons who were Property Practitioners at the time when they committed an offence under the Act. I believe the purpose of this is to enable a person to be sanctioned under the Act, even after they have left the industry.
The new Act also makes provision for specific exclusions from the definition of Property Practitioner. These are:
- A person who does not carry out any of these functions “in the ordinary course of business”;
- A natural person who sells their own property, even if it is in the ordinary course of business. It is notable that the exemption does not specifically extend to the sale of a business or the leasing of a property by the owner thereof, although this might be covered in the first category;
- Attorneys and Candidate Attorneys and the Sheriffs of the Court.
APPLICATION OF THE ACT
Section 2 of the Act, which is entitled “Application of Act” sums up quite succinctly the broad application of this new law, it reads as follows:
- This Act applies to the marketing, promotion, managing, sale, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.
But what about businesses? Perhaps the drafters only wanted the new Act to apply to business brokers when the business included rights in immovable property, but they have not said this.
By casting its net so wide the new Act will have the potential to bring in more money to the new regulating Board of Authority that will take over from the EAAB. With all these new people to regulate and police however, I can see that this organisation is going to struggle to act efficiently and to meet its objectives.
THE ADMINISTRATION OF THE ACT
The Act will be implemented through a body called the Property Practitioners Regulatory Authority. This body will replace the Estate Agency Affairs Board. The duty of the PPRA will be to:
- regulate the conduct of property practitioners and ensure that they comply with the Act;
- protect and educate consumers;
- provide for education, training and development of property practitioners; and
- champion the transformation of the property sector.
The PPRA will be overseen by a board of between nine and twelve non-executive members and the CEO. This board must have a combination of financial and legal experience, and experience as property practitioners. There must also be experience in rural and land reform and consumer interests. With all the skills required. The possibility exists that the board will be dominated by people with little experience in the estate agency field.
The CEO will be responsible for the day-to-day running of the PPRA. This person will be appointed for five years at a time and can serve two terms. The CEO will hire a staff complement to enable the PPRA to carry out its functions.
In the next part of this series, which will be published next week, I will deal with the transformation of the property sector, compliance and enforcement issues, the PPRA’s duty to adjudicate on disputes and the Fidelity Fund.
Miltons Matsemela Inc
8 January 2019