It’s been somewhat of a busy couple of weeks from a property regulatory perspective. Two property Bills were signed into law: the Property Practitioners Bill of 2019 (PPB) and the Electronic Deeds Registration Systems Bill of 2019; and the Constitutional Court upheld a ruling that homes that are being built for leasing and rental purposes must be enrolled with the National Home Builders Registration Council (NHBRC).
Property Practitioners Bill
Transformation has been long in coming for the property market. For 43 years the Estate Agency Affairs Act of 1976, which the PPB replaces, had, among other issues, exposed property buyers to the rule of ‘voetstoots’, which left them exposed to financial risk when buying homes.
Voetstoots - the act of purchase without guarantee - meant that should a buyer discover (after conclusion of a sale agreement) that the property has defects, they literally had to suck it up largely because to prove that a seller, or the agent for that matter, had deliberately concealed known defects, was difficult and associated with high legal costs.
While most estate agents/agencies have been practicing their craft with awareness and honourably coaching the sellers to reveal such defects, the PPB ensures that consumers are protected with the mandatory provision of a Property Defects Disclosure. This means an agent can no longer accept a mandate from a seller without written disclosure of all known defects, which they in turn must reveal to the buyer.
Considering that sellers cannot be expected to be aware of every potential structural flaw, compliance notices will be required, which is suggested will be undertaken by an inspector appointed by the Board of Authority, the latter replacing the Estate Agency Affairs Board. Such inspectors will be required to obtain warrants to enter premises.
The Board of Authority serves to govern all property practitioners, namely estate agents, bond brokers, home inspectors, property managers and brokers as opposed to just estate agents as is currently the case. The Board will also be mandated to inform consumers of their property rights, and property agents of their obligations.
A Property Practitioners Ombudsman is also to be established. This will lighten the load on courts given it will have the power and function to consider and dispose of complaints by the public against property practitioners.
In turn property practitioners will be bound to comply with an additional requirement to their Fidelity Fund Certification which confirms that agents/agencies are legally entitled to carry out estate agency activities; that being to be in possession of valid tax clearance and BEE certificates.
Overall the Bill, which aligns the industry better to global best practices, provides improved consumer protection by deepening regulation of property practitioners that have to ensure that their duty of care is to both buyers and sellers. However, the practical implementation of the PPB is yet to be informed by regulation. This is expected to take some time and only once regulation is agreed, published for comment, and Ministry approval granted, can the Act be promulgated.
Electronic Deeds Registration Systems Bill
At last South African buyers and sellers will experience improved turn-around times in the provision of registered deeds and documents. The Bill introduces e-DRS, the Electronic Deeds Registration System, which enables the electronic processing, preparation and lodgement of deeds and documents by conveyancers and the Registrar of Deeds. The government believes this will greatly enhance security of title and the acquisition and disposal of fixed assets.
Other benefits include: the enabling of registration of large volumes of deeds; countrywide access to deeds registration services; enhanced accuracy of examination and registration; availability of information to the public; and security features including confidentiality, non-repudiation, integrity and availability.
However, e-DRS, as with the PPB, may take some time before the reality of practice can be realised.
Rental markets must be enrolled with the NHBRC
The Constitutional Court, with the dismissal of an appeal in September brought by rental market developer Xantha Properties 18, has reinforced that homes being built for leasing and rental properties must be enrolled with the NHBRC.
According to the Housing Consumers Protection Measures Act 95 of 1998 (HCPMA) all new homes must be enrolled with the NHBRC 15 days prior to construction. Home enrolment insures consumers against poor building practises and permits the NHBRC to conduct building inspections at key stages of construction. A newly enrolled home can be subject to a minimum of four and a maximum of eight inspections (this depends on the enrolment value of the home as well as the complexity of the construction).
The matter brought before the Constitutional Court had huge implications for housing consumers who rely on the rental market to access a home. Xantha challenged the constitutionality of provisions of the Act proposing that it (Xantha) should not be required to enrol homes given they are constructed solely for purposes of leasing or renting out and would not be sold to third parties.
“Xantha’s success would have had the effect of undermining the objects of the Act or its effectiveness to regulate the home building industry and to protect housing consumers,” said NHBRC Acting CEO Otsile Maseng. “We welcome this ruling as it once again vindicates the NHBRC mandate against developers and builders who don’t adhere to building standards and the law.”