PPA sections of interest

1. The definition of Property Practitioner in the act includes more professions/business enterprises than the definition of Estate Agent did in the previous act. Those included as Property Practitioners, amongst others, are:

1.1. Anyone who sells “business undertakings” i.e., business brokers. 

1.2. Anyone who provides or markets bridging finance.

1.3. Anyone who provides or markets bond brokering.

1.4. Any paralegals working for attorneys who perform any of the functions of a property professional. 

2. Several paragraphs in the act provide for the transformation of the entire “property market” and for the inclusion of historically disadvantaged individuals.

3. The act calls for a Property Practitioners Regulatory Authority to be established – like Eskom, this will be a public entity wholly owned by the government. It will be governed by a board known as the “Board of Authority” or simply the “Authority” and the entire Authority will be accountable to the Minister of Human Settelments. In the previous act, the Board of Directors was appointed by the Minister, but with certain restrictions on that power. The previous act also directed that the board be made up of 15 members – five appointed from the estate agent industry, five from consumer organisations and five from related professions, e.g., legal, financial, property owners and developers. Under the PPA, however, the Minister can appoint anybody he or she likes provided they have one of the following:

• • Sufficient financial expertise.
  • Relevant legal experience.
  • Sufficient experience as a property practitioner.
  • Sufficient experience in promoting consumer interest. 
  • Sufficient experience in property management or financing. 

There is no requirement that a certain minimum be appointed from the estate agent industry. The Authority must be representative of race, gender, and disability. Its functions will include advising the Minister on the state of transformation of “the market” and appointing a CEO who will, in turn, appoint employees.

4. The act has created the concept of compliance notices. It appears that the Minister will determine contraventions of both a minor and substantial nature on the part of Property Practitioners. If an inspector of the new Authority believes there has been a minor contravention, he or she may issue a compliance notice, giving the Property Practitioner a reasonable period to comply with this notice. The notice can include the imposition of a fine. Anyone who refuses to comply with such a notice is guilty of an offence. Once a fine has been paid on a minor offence, no further prosecution will be possible, and the offence cannot be held against the offender’s record. The PPA does not indicate what will happen in the case of a contravention of a substantial nature, apart from the penalty clause in section 71 once mediation (section 29) and adjudication (section 30) have been exhausted. 

5. The act calls for a Property Practitioners Fidelity Fund to be established, which will absorb the current fidelity fund of estate agents. It appears that Property Practitioners will have to pay an annual fee to this fund. And while the fund is to be managed by the Authority, the PPA does make allowance for it to be “outsourced”.

6. The act creates room for the Authority to give “grants” for several purposes, including the “transformation of the property sector”. 

7. Property Practitioners must, as with the previous act, apply for a Fidelity Fund Certificate and pay the prescribed fee. This certificate is valid for three years. Certificates will not be issued unless the Property Practitioner is in possession of a valid tax clearance certificate and a BEE certificate. The act does not stipulate what qualifications will be required of the various categories of practitioners.

8. A Property Practitioner cannot enforce the recovery of remuneration (commission) unless he or she and anyone employed by him or her as a Property Practitioner has a Fidelity Fund Certificate. This change reverses improvements made in the previous act and could, logistically, be very difficult for large agencies to comply with. If the seller has already paid the commission, he or she is entitled to a refund (this reverses the previous 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 if good cause is shown. An operations/office manager of a Property Practitioner must also have a Fidelity Fund Certificate.

9. All records must be kept for five years – they may be kept electronically.

10. 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. 

11. The Minister will prescribe indemnity insurance – this must be taken out and maintained by Property Practitioners.

12. Property Practitioners may not enter into any arrangement, formal or informal, 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 will also affect agreements between estate agencies and mortgage originators and the like.

13. No agent may receive commission from a sale until it is registered.

14. Franchisors of estate agencies can be held liable for the misconduct of their franchisees. This is extraordinary.

15. It will become mandatory for sellers to complete a property defects disclosure form. No mandate may be taken from a seller without this document, which must be given to the purchaser and will form part of the sale agreement.

16. The maximum criminal sanction for offences is a fine of imprisonment for a maximum of 10 years.

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