Property professionals need to be aware of the Property Sector Transformation Charter Code (the Property Charter), as well as the Property Practitioners Act (No 22 of 2019) (PPA).
Section 20(1) of the PPA states: “The Property Sector Transformation Charter Code, as amended from time to time, applies to all property practitioners.”
The Property Practitioners Act (PPA) will repeal the entire Estate Agency Affairs Act (No 112 of 1976 (EAA Act). President Cyril Ramaphosa has signed the Act into law, but the date it will be enforced is yet to be determined.
The draft regulations contained in the Act were published for public comment in March 2020. When all responses have been processed, the enactment date will be decided.
Transformation
Chapter 4 of the PPA deals with the transformation of the property sector.
Specifications include:
When procuring property-related goods and services, all organs of the state must utilise the services of property practitioners who comply with the broad-based black economic empowerment and employment equity legislation and policies.
The Property Practitioners Regulatory Authority (created in terms of Section 5 of the PPA) must from time to time implement and assess measures to promote an inclusive and integrated property sector progressively.
The Authority must create mechanisms for the continuous monitoring and evaluation of the sector performance on the transformation imperatives and granting of incentives as prescribed.
The Authority must introduce measures to be implemented, which may include incubation and capacity building programmes to redress the imbalances of the past.
Within six months of its establishment, the Authority must open a Property Sector Transformation Fund into which grants contemplated in section 38 are paid.
The Minister of Human Settlements may prescribe measures to promote economic transformation by facilitating the accessibility of finance for property ownership, property development and investment to enable meaningful participation of historically disadvantaged individuals, including women, youth and people with disabilities.
The Authority must utilise the Fund in such a manner as may be prescribed, which may include the following transformation and empowerment programmes: Principalisation Programme to promote Black-owned firms and principals. Regularisation Programme to promote and encourage the 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.
In consultation with the services Sector Education and Training Authority (SETA), the Authority must develop special dispensation for the training and development of historically disadvantaged individuals, which must include recognition of prior learning.
Property Charter
The Property Charter establishes a framework and principles upon which B-BBEE will be implemented in the sector, as envisioned in the Broad-Based BEE Act (No 53 of 2003) and the Department of Trade and Industry (DTI) Codes of Good Practice on B-BBEE.
The Charter lays the basis for developing a code of good practice for the property sector, as envisioned in Section 9(1) of the B-BBEE Act, and it sets up targets for each element of B-BBEE. In addition, it outlines processes for implementing commitments within the Property Charter and provides mechanisms to monitor and report on progress.
Once the PPA becomes law, one of the requirements for issuing Fidelity Fund Certificates (FFCs) will be a valid BEE certificate. To obtain a BEE certificate, property practitioners will have to comply with the Amended Property Sector Code.
The Code was published in the Government Gazette on 9 June 2017. It applies to all enterprises engaged in property transactions, including estate agents, rental agents and property developers.
Exemptions
Businesses falling below certain income thresholds are exempt from specific compliance with B-BBEE requirements.
Asset-based businesses with assets valued at under R80 million are exempt.
Services based organisations, such as property management companies, will be exempt if their annual turnover is below R10 million.
Estate agencies are exempted from the B-BBEE requirements if their annual turnover is below R2.5 million.
In certain instances, new businesses will be exempt from complying with the requirements for the first year.
Other BEE criteria
Other criteria for measuring BEE compliance include:
Ownership - measures effective ownership of entities by Black people, with initial target percentages ranging from 3% to 27%. Companies will have 10 years in which to achieve 50% black ownership.
Management control - measures the effective control of organisations by black people, with voting targets for estate agencies ranging from 50% to 60%.
Employment equity - measures initiatives for achieving equity in the workplace under the BBBEE Act and the Employment Equity Act.
Skills development - measures employer initiatives designed to develop the competencies of black individuals through learning programmes, apprenticeships and internships.
Enterprise and supplier development - measures the extent to which organisations acquire goods and services from empowering suppliers with at least 51% black ownership.
Socio-economic development - measures initiatives that promote access to the economy for black people.
Economic development - measures the extent to which entities contribute towards development in under-resourced areas.
Compliance
To be able to operate legally, property practitioners are required to renew their fidelity fund certificates annually with the Estate Agency Affairs. In terms of the PPA, one of the requirements for issuing an FFC is a BEE certificate.
Therefore, it is essential that estate agency principals and agents must familiarise themselves with the Property Practitioners Act and the Property Charter requirements and prepare to comply.