Property Practitioners Act impacts on home owners

Private Property South Africa
Kerry Dimmer

Although the Property Practitioners Act (PPA) is largely directed at improving the property industry players, home owners should be aware of its impacts.

The PPA was signed into law on 02 October 2019, replacing the 43-year-old Estate Agency Affairs Act (EAAA). As is the case with the Amendment to S25 of the Constitution related to land expropriation, the PPA has yet to be enacted, which requires a formal declaration, by the President, through the Government Gazette.

The intention of the new Act is to fast-track transformation in the sector. Although welcomed by the industry, given that the old Act has not been changed in some 40-plus years, there remains some under-resolved issues around the PPA.

Private Property asked Jan le Roux, the chief executive of Rebosa, for clarification. Rebosa, the Real Estate Business Owners of South Africa organisation, is a non-profit, representing ‘the best interests of business owners and principals of small, medium and large estate agencies operating in the residential real estate sector.’

Q: What role has Rebosa played in determining the PPA’s purpose?

A: From the date the Property Practitioners Bill was published, Rebosa has played as big a role as possible. We consulted with the legal firm Cliffe, Dekker Hofmeyr, who prepared a detailed commentary on the Bill, which resulted in a 40-page long document.

Using this we were able to motivate for comment from our members, on not just technical aspects of the then-proposed Bill, but also on matters of principle. These were presented to the Parliamentary Committee, and I personally attended all the sessions of all the sub-Committees, right through to the final approval which was taken by the Council of Provinces. (The Council of Provinces is the final parliamentary step in an Act approval, which requires at least six provinces to endorse an Act or Amendments.)

Unfortunately many of Rebosa members’ comments were not taken to heart, which we believe leaves the Act in a less-than-perfect state.

Q: What is the history behind the PPA, and why was change necessary?

A: The existing Estate Agency Affairs Act (EAAA) came into being in 1977 and has been amended a number of times over the past four decades. There were calls for a new Act, which were really only taken most seriously in 2006, taking a further 12 years before coming to fruition.

I believe the main reason for changing the Act as urgently as government did last year, is a specific court case, which received attention a couple of years ago. That case concerned Auction Alliance, which essentially challenged the Estate Agency Affairs Board, who was acting under the old EAAA, by not allowing it to enter their premises and remove documentation, following a complaint. At the time Auction Alliance took the matter to court and won on a constitutional point. Obviously this highlighted a loophole in the old Act, that needed to be remedied, hence the new Act in terms of which the Board, or rather the Authority as it is now called under the PPA, will have the authority it always thought it had but in reality, didn’t.

Another reason for the new Act, was government’s desire to force transformation in industry. Government believes this act will achieve this.

Q: Who does the PPA impact on?

A: The new Act impacts on a number of people. The old Estate Agency Affairs Act only impacted on estate agents whereas the net has now been cast quite a bit wider in that property managing agents, bond consultants/originators, etc, are also included. Developers too, as they are now defined as Property Practitioners.

An objective of the PPA is to ensure that it encompasses absolutely every entity in the process of housing supply, whether that be for sale or to rent.

Q: What are the most significant differences between the PPA and the EAAA?

A: The most significant is Chapter 4, which focuses on transformation, and the creation of a Transformation Fund and Property Research Centre.

Another important difference are changes that relate to powers of inspection of the new Property Practitioners Regulatory Authority, which is to be formed under the Act to replace the previous regulatory body, the Estate Agency Affairs Board. There are also the addition of clauses related to mediation and adjudication, which previously did not exist.

Other changes will improve an estate agent’s manner of doing business, and I highlight in particular, those that impact on Fidelity Fund Certificates (FFC). These are issued to agencies proving that an agent is insured and has a licence to operate in the South African market. Very simply, a Fidelity Fund is an insurance that protects the client who can claim should an agent steal the deposit, after following due process.

Q: How does the PPA impact on residential home owners?

A: I don’t believe the new Act impacts home owners any differently from the old Act. What is important to understand is that if agents were to take deposits from clients and misappropriate same, the Fidelity Fund will cover such deposits under certain circumstances, one of which being that the agent must be duly registered.

Under EAAA, unregistered agents were covered but with PPA, if an unregistered agent receives a deposit, no insurance is applicable. Agents, as before, still have to obtain disclosures from clients before marketing properties, etc.

Thanks to the mediation and adjudication clause in the PPA, consumers will be enabled to submit claims against estate agents as specified in the Act.

Q: What steps must a home owner take if they find an agent in contravention of the Act?

A: If a home owner believes that the estate agent is in contravention of the Act, a simple complaint to the EAAB, or the Property Practitioners Authority when it is formed, would be the appropriate step to take. Of course civil action is never excluded from such procedures. www.eaab.org.za, the portal for the Estate Agency Affairs Board outlines the processes required to lodge a claim.

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