The definition of property practitioners in terms of the PPA is extremely wide and includes auctioneers, letting agents, developers, estate agents, bridging finance entities, bond originators and timeshare consultants.
As an interesting aside: any employees of an attorney’s practice who actively market a property for hire or sale will fall in the definition of property practitioners, but conveyancers are specifically excluded from the definition of property practitioner, even though the definition is also wide enough to include them.
The Estate Agents Affairs Board will cease to be called by that name. Instead, the old “board” is now known as the Property Practitioner’s Regulatory Authority, or the PPRA.
The enactment of the PPA has placed new compliance and certification requirements on property practitioners. Some of these newly formed obligations include the following:
- Fidelity Fund Certificate
Where applicable, property practitioners are now expected to display a Fidelity Fund Certificate (FFC) for consumers to inspect.
A property practitioner is not entitled to any remuneration unless the property practitioner and, if a company, every director of the company, has a valid FFC on the day the Offer to Purchase / Lease Agreement is signed. A conveyancer may not pay any remuneration or other money to a property practitioner unless the property practitioner has provided the conveyancer with a certified copy of the relevant valid FFC.
This has been met with particular criticism as obtaining an FFC is heavily dependent on the efficiencies and effectiveness of government entities issuing them and there may be some huge frustrations and business pressures, especially concerning developers who are now classified as property practitioners.
However, property practitioners do receive some relief under the PPA in the case where the PPRA does not issue an FFC but also does not provide a reason or objection to issuing one Property Practitioners may continue to trade. Put another way, if property practitioners apply for an FFC on time and pay the prescribed fee, they may trade as if they have a valid FFC after 30 working days have elapsed from the application date and the EAAB has not given them any feedback or reason as to why the FFC has not been issued.
- Maintaining a Trust Account
All property practitioners are now expected to, inter alia open and keep one or more separate trust account/s; deposit all trust money in the relevant trust account; keep separate accounting records in respect of the trust account/s and cause them to be audited by an auditor.
There is potential reprieve offered in terms of section 23 of the PPA which provides that 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 and in addition thereto determine different dispensation for the review of accounting records for those property practitioners.
- Keeping Records
All Property Practitioners must for five years retain, various documentation, which amongst others includes all agreements, mandates, mandatory disclosure forms and also all advertising or marketing material relating to the carrying on of business as a property practitioner.
- Maintaining Mandatory Indemnity Insurance
If there is a contravention of a code of conduct (that will be published by the Minister of Human Settlements) or other sanctionable conduct occurring in terms of the PPA, the Minister may prescribe indemnity insurance which the property practitioner must take out as a countermeasure to such actions.
Another important provision is the Mandatory disclosures requirement. The PPA is a consumer-focused piece of legislation that has been designed to protect consumers in the property industry.
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 must be signed by all relevant parties and must be attached to any agreement for the sale or lease of a property, thus making the form an integral part of the agreement.
Should the parties neglect to complete, sign or attach the mandatory disclosure form, then it is deemed that no defects or deficiencies of the property subject to the agreement were disclosed to the purchaser. The PPA does not impact the validity of a voetstoots clause in a sale of property agreement where the latent defect, present at the time of the sale, was not known to the seller and not deliberately concealed from the purchaser.
One of the core objectives of the PPA is promoting and enhancing the participation of historically disadvantaged South Africans in the property sector. The PPA provides that 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. Chapter 4 of the PPA is dedicated to this notion, providing that A Property Sector Transformation Fund will be established from which grants will be paid to further transformation in the property industry.
The PPA states that the Property Practitioners Regulator Authority must implement and assess measures to progressively promote an inclusive and integrated sector, and also introduce measures which may include incubation and capacity-building programmes to redress the imbalances of the past, among others.
Interns, now known as candidate property practitioners in terms of the PPA, must undergo training for 12 months. Such training must be conducted under the active supervision and control of the principal or a qualified agent with at least three years experience. Candidate property practitioners may not complete agreements of sale or other documents without active supervision by their principals. Should they fail to comply with the PPA Regulations, their principles will be held liable.
In terms of section 28 of the PPA, any person may, in the prescribed form, lodge a complaint with the Authority against a property practitioner in respect of financing, marketing, management, letting, hiring, sale or purchase of a property.
It is important to remember that with any new legislation or regulatory dispensation comes some uncertainty. It remains to be seen how the PPA and Regulations will be enforced and further what regulations will be forthcoming for the new industries that have now been brought under the oversight of the PPRA.