The news that the Estate Agency Affairs Board (EAAB) has been placed under administration may well be the best news that property buyers and sellers have had in a long time. Apart from scrutinising the financial affairs of the Board, the powers that be will be establishing an in-house inspectorate to ensure that no unregistered agents are operating.
Although the EAAB is a consumer body, every practising estate agent has to register with the body and must be in possession of a Fidelity Fund certificate. Anyone, regardless of how much experience they have or how long they have been involved in the industry, has to have this important document before they can sell property in South Africa. Any agent should be able to produce this valuable document on request and anyone who cannot prove that they are legally entitled to sell property should be avoided like the plague.
There are a number of reasons why an agent may not be registered, including the inefficiency of the Board itself, which has been known to delay the delivery of the required certificates. However, there could well be sinister reasons as to why the agent does not have a valid Fidelity Fund certificate, and these might include failure to keep proper trust fund records.
Like a lawyer, every registered agent has to have their trust fund audited on an annual basis and the EAAB will not issue a Fidelity Fund certificate if discrepancies are found. Estate agents are responsible for large sums of money, including deposits paid by the buyer to the seller. One has to wonder why anyone would take the risk and deal with a person who may or may not have had his fingers in the till and pilfered money?
While the previous statement sounds a little harsh, there have been instances where this has indeed been the case. It may be argued that buyers are protected by the Fidelity Fund itself and would be able to recover the money from the EAAB. Nothing in life is guaranteed however, and a recent report released by the Board indicates that while it settled claims amounting to R3.8-million, it had rejected claims to the value of R2.5-million. There are currently claims of R4-million still pending.
Of course, using the services of a registered agent doesn't necessarily offer buyers and sellers blanket protection. However, it stands to reason that those who are compliant and who have met the Board’s requirements are a lot more trustworthy than those who don't.
Of the 651 trust fund inspections carried out by the Board recently, 301 primary trust fund contraventions were discovered. While it is important to remember that there may well be valid reasons for the discrepancies and the findings do not necessarily point to wrongdoing, it is still a fairly distressing figure.
It's no secret that the EAAB has been under-performing for many years and there are agents out there who have taken full advantage of the situation. On a brighter note, the report revealed that action was being taken against erring agents and the number of disciplinary procedures instituted against agents had increased from 172 during 2010/11 to 214 by April this year. Of this figure, according to newspaper reports, there were 140 guilty findings and 32 acquittals. The other 42 cases were still pending.
The Board also noted that its inspection statistics revealed that 100 estate agencies were operating illegally. The legal infringements included sole mandates, contracts, sales agreements and lease agreements.
Although it appears that things are set to improve at the EAAB and that there will be a clampdown on those who are practising illegally, consumers should still take every precaution to ensure that the agent with whom they deal is above board. One of the easiest ways of doing this is checking to see if the agent is in possession of a Fidelity Fund certificate that is valid for the current year.