Property Practitioners Act

Property Practitioners Act

Private Property South Africa
Sarah-Jane Meyer

The Property Practitioners Act (No 22 of 2019) (PPA) will repeal the entire Estate Agency Affairs Act (No 112 of 1976 (EAA Act). President Cyril Ramaphosa has signed the Act into law, however, the date when it will come into force is yet to be determined.

The draft regulations contained in the Act were published for public comment in March 2020. Once the responses have been processed the enactment date will be decided.

When it does come into force, the PPA will place some new obligations on property practitioners, according to Ulrik Strandvik, a director at Gunston Strandvik Attorneys. These include mandatory display of fidelity fund certificates. Reviewed trust account requirements and training of candidate property practitioners (CPPs – formerly interns).

In addition, the protection of consumers as well as transformation in the property industry are two major objectives of the Act.

Agent obligations

Fidelity Fund Certificate. Display of a Fidelity Fund Certificate (FFC) is mandatory. “A holder of a FFC must: (i) prominently display his or her FFC in every place of business where he or she conducts property transactions, to enable consumers to easily inspect it; (ii) ensure that the prescribed sentence regarding holding a FFC is reproduced on any letterhead or marketing material; and (iii) in any agreement relating to property transactions, include a prescribed clause guaranteeing the validity of the certificate.

Maintaining a trust account. Every property practitioner must: (i) open and keep one or more separate trust account/s; (ii) appoint an auditor; (iii) provide the Property Practitioners Regulatory Authority (Authority) with all information with regards to the trust account/s and auditor appointed; (iv) deposit all trust money in the relevant trust account; (v) keep separate accounting records in respect of the trust account/s and cause them to be audited.

However, in terms of Section 23 of the PPA, the Minister may by notice in the Gazette determine the circumstances under which certain property practitioners may be exempted from keeping trust accounts; and determine a different dispensation for the review of accounting records for those property practitioners.

Keeping records. Every property practitioner must for a period of five years retain: (i) all documents exchanged with the Authority; (ii) all agreements, mandates and mandatory disclosure forms relating to financing, sale, purchase, or lease of property; and (iii) any advertising or marketing material relating to the carrying on of business as a property practitioner.

Maintaining mandatory indemnity insurance. For the purposes of providing redress in respect of the contravention of a code of conduct or other sanctionable conduct in terms of the PPA, the Minister may prescribe indemnity insurance which a property practitioner must take out and maintain.

Transformation

Chapter four of the PPA deals with transformation, with the broad objective of putting in place mechanisms for promoting and enhancing participation of historically disadvantaged South Africans in the property sector.

Section 20 specifies that when procuring property related goods and services, all organs of state must utilise the services of property practitioners who comply with the broad-based black economic empowerment and employment equity legislation and policies.

A Property Sector Transformation Fund will be established from which grants will be paid to further transformation in the property industry. Programmes include:

  • Principalisation programme, to promote black-owned firms and principals.
  • Regularisation programme, to promote and encourage participation of the historically disadvantaged due to non-compliance.
  • Consumer awareness programme, to promote awareness of property transactions and business undertakings.
  • Work readiness programme, to promote and enhance participation of the historically disadvantaged in the property sector. Consumer protection

Mandatory disclosures. To protect consumers, the PPA specifies that property practitioners:

  • must not accept a mandate unless the seller or lessor of the property has provided him or her with a fully completed and signed mandatory disclosure in the prescribed form and;

  • must provide a copy of the completed mandatory disclosure form to a prospective purchaser or lessee who intends to make an offer for the purchase or lease of a property.

The completed mandatory disclosure form signed by all relevant parties must be attached to any agreement for the sale or lease of a property, and forms an integral part of that agreement. However, if such a disclosure form was not completed, signed or attached, the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser.

Limitation on relationships with other property market service providers. . Section 58(2) of the PPA outlaws any type of practice in which a practitioner provides a consumer with an incentive to use a particular conveyancer or service provider.

Property practitioners who contravene this section of the PPA are not entitled to remuneration. They will be required to repay any fees received for a property transaction and may be fined.

“This section of the PPA has significant practical implications for the way estate agencies – and conveyancers - do business,” says Strandvik.

Training

Candidate property practitioners (CPPs) - formerly known as interns – must undergo 12 months of training, under the active supervision and control of an agency principal or a qualified agent with at least three years’ experience. During their internship, they must disclose to clients that they are CPPs.

CPPs may not complete agreement of sale or other documents without active supervision. If CPPs don’t adhere to the PPA regulations, their principals will be held liable.

Conclusion

“Many of the obligations are similar to those in the Estate Agency Affairs Act,” says Strandvik.

“However, estate agents are advised to familiarise themselves with the PPA to ensure that they do not unnecessarily fall foul of the new legislation when it comes into force.

“The consequences could be serious as any property practitioner convicted of an offence in terms of the PPA is liable to a fine, or to imprisonment for up to 10 years.”

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