As we enter the latter part of 2020, most South African businesses and individuals are feeling financially strained due to the far-reaching effects of the COVID-19 pandemic. The same is true in the property rental industry as landlords, tenants and agents alike are forced to have difficult conversations about affordability, lease agreements and upholding commitments. In situations like this, the importance of a trusted payment service provider is clearer than ever.
Trust your payment provider
PayProp South Africa CEO, Jan Davel, says that when times are tough, it’s important for all parties in a rental contract – the rental agency, landlord and tenant – to deal with a trusted payment service provider.
PayProp is an automated payment platform for the residential rental industry, allowing rental agencies to transact with landlords and tenants in a quick and transparent way, using world-class technology. Since 2004, PayProp South Africa has successfully processed over R66 billion in residential rental payments, and recently processed more than R1 billion in a single month.
Data protection and trust funds Davel goes on to say that in tough times, it’s equally important to pay close attention to how a business operates. In the rental industry, key areas to consider are client data protection and the management of trust funds.
“PayProp provides and operates a suite of real estate agents’ trust accounts that are used in more than 1 200 instances by registered South African estate agencies – each of whom has had unqualified trust audits each year,” says Davel. “We refer to this as our ‘client money environment’ and it specifically relates to consumers’ funds held in trust”.
He adds that as per Section 32(8) of the Estate Agency Affairs Act of 1976, client monies in trust accounts form part of neither PayProp’s nor the estate agency client’s balance sheet, ensuring transparency and protection. Furthermore, PayProp’s bank-integrated environment offers permanent audit logs which cannot be deleted, helping estate agencies protect their clients’ trust monies.
According to Davel, the following guidelines will help rental agencies looking for a rental payment technology partner:
1. Risk
At the most basic level, the service provider should offer exceptional financial controls, including:
• Requiring at least two professionally qualified signatories on all bank account activity.
• Opening all bank accounts as designated Section 32(1) or Section 32(2) accounts under the Estate Agency Affairs Act (112 of 1976).
• Guaranteeing that the service provider does not conduct business as, or hold interest in, a competitor estate agency.
2. Control environment
• Segregation of duties – no single person should be responsible for or capable of carrying out any transaction from start to finish, leaving no room for human error or manipulation and allowing a fully bank-integrated system to be in place.
• The client money environment must be fully synchronised, in real time, with the bank environment. This host-to-host service must be uninterrupted and run by a team that is separate from and made up of members that are different from the client money team.
• Daily accounting of all client monies must take place for each tenant and landlord, undertaken by a dedicated client money team.
• A wide range of responsible people in the organisation should receive automated transaction notifications to alert them of every transaction and potential payment failures caused by, for example, cancelled cheques or failed debit orders.
• Online access must be controlled with user rights restrictions.
• Permanent audit logs should be kept to keep track of which individual attended to which part of every transaction.
• External audits and reviews should be carried out routinely.
• Reports must be generated in real time and in sufficient detail to provide an audit trail of every transaction from start to finish – down to the very last cent.
The service provider is responsible and accountable for payments in a trust environment. To protect landlords’ and tenants’ best interests, it should offer full Professional Indemnity Cover, covering crime (including cybercrime) and civil liability.
4. Fidelity Fund Cover and new draft regulations
Service providers that handle estate agencies’ rental payments are a link in a value chain that is regulated in terms of the Estate Agencies Affairs Act 112 of 1976 and should be registered and accredited as such.
Section 54 of the new Property Practitioners Act (22 of 2019) deals with trust monies and is fundamentally the equivalent of Section 32 of the previous Act. There is therefore no doubt that, going forward, the protection of client monies should still be prioritised. In addition to this, even if an agency is exempted from running its own trust accounts, its property rental payments must still be facilitated by service providers who are accredited Property Practitioners with valid Fidelity Fund Certificates.
The draft regulations to the new Property Practitioners Act (22 of 2019) are not yet in effect, but Regulation 4.4 states that, going forward, Property Practitioners who use an accredited "payment processing agent" (such as PayProp) can be exempted from operating their own trust accounts by following a prescribed procedure which makes them subject to the client money protection rules of accredited payment processing agents like PayProp.
5. Responsible corporate governance and data protection
• The overall structure of a payment service provider must always be taken into account. PayProp has both listed public companies and non-listed public companies as shareholders. The ongoing governance requirements of these shareholders – especially African Rainbow Capital, which is listed on the Johannesburg Stock Exchange – ensure a high level of board oversight.
• Just as estate agents should know their clients, they should also know their service providers. Being aware of processes will help maintain accountability.
• Estate agents are required to protect client data under the Protection of Personal Information Act 4 of 2013 (POPIA), which came into effect on 1 July 2020. Being part of an international group, PayProp has plentiful experience of working under other international data protection frameworks such as the European Union’s General Data Protection Regulation (GDPR).
• Estate agents should ensure that their service provider uses a reputable data centre that offers strong physical, electronic and personnel security measures to protect consumers’ data.
• Estate agents should also familiarise themselves with the service provider’s other security measures. All aspects of Web application security, including infrastructure vulnerabilities, cross-site scripting, secure data storage and sufficient back-ups should be considered for optimal security.
As a business that processes recurring rental payments to the value of hundreds of millions of Rands, PayProp ensures the utmost safety of client payment information and related data. All transaction information entering PayProp systems is encrypted using 256-bit SSL certificates, and no information is ever passed unencrypted in a Web browser to PayProp.
“Our clients can rest assured that nothing they enter as part of a secure PayProp transaction can be examined, used or modified by any third parties attempting to gain access to sensitive information,” says Davel.