Introduction
The estate agency industry and the property industry more broadly is set to see significant changes with the introduction of the Property Practitioners Bill. The Bill will replace and repeal the current Estate Agency Affairs Act 112 of 1976 (hereinafter referred to as the “Estate Agency Act”). This will leave many people wondering what the implications of this new Bill are, and what changes it might bring about.
Expanded definition of Property Practitioner
The Estate Agency Act only accommodates Estate Agents as defined in therein.
The New Bill will instead refer to the broader concept of “property practitioner”: which reads as follows:
“(a) means any person or business undertaking who or which for the acquisition of gain on his, her or its own account or in partnership, in any manner holds himself, herself or itself out as a person or business undertaking who or which, directly or indirectly, on the instructions of or on behalf of any other person-
(i) by auction, in sale of execution or otherwise sells, purchases, manages or publicly exhibits for sale property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvas a seller or purchaser in respect thereof;
(ii) lets or hires or publicly exhibits for hire property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvass a lessee or lessor in respect thereof;
(iii) collects or receives any monies payable on account of a lease of a property or a business undertaking;
(iv) provides, procures, facilitates, secures or otherwise obtains or markets financing for or in connection with the management, sale or lease of a property or a business undertaking, including a provider of bridging finance and a bond broker, but excluding any person contemplated in the definition of “financial institution” in section 1 of the Financial Services Board Act …;
(v) assesses property to determine the defects, value for money and fit for use as part of the conclusion of an agreement to sell and purchase, or hire or let a property;
(vi) in any other way acts or provides services as intermediary or facilitator with the primary purpose to, or to attempt to do so, effect the conclusion of an agreement to sell and purchase, or hire or let, as the case may be, a property or business undertaking, including, if performing the acts mentioned in this subparagraph, a home ownership association, but does not include-
Exclusions are provided for in paras (aa) to (dd) and include a person who does not do so in the ordinary course of business; where the person is a natural person and that person in the ordinary course of business offers a property for sale which belongs to him or her in his or her personal capacity; an attorney or candidate attorney; or a Sheriff of the Court when he or she performs any functions contemplated in (a) above irrespective of whether or not he or she has been ordered by a court of law to do so.
(vii) renders any other service specified by the Minister on the recommendation of the Board from time to time by notice in the Gazette;
(b) includes any person who sells, by auction or otherwise, or markets, promotes or advertises any part, unit or section of, or rights or shares, including time share and fractional ownership, in a property or property development;
(c) includes any person who for remuneration manages a property on behalf of another;
(d) includes a trust in respect of which the trustee, for the acquisition of gain on the account of the trust, directly or indirectly in any manner holds out that it is a business which, on the instruction of or on behalf of any other person, performs any act referred to in paragraph (a);
- Bond Broker;
- Home inspector;
- Facilitator of agreement of lease or sale;
- Seller of timeshare or fractional title;
- Property manager and
- Property developer.
Property Practitioner will expressly exclude the following persons:
- Attorneys;
- Candidate Attorneys;
- Sheriffs of the Court and
- Persons selling their own property in their personal capacity.
The definition of Property Practitioner is no longer qualified by the term “work for gain or reward”. This means that a Property Practitioner will no longer necessarily have to work for some form of payment to fall under the scope of the new definition.
Property Practitioners’ Ombud & Expanded powers of inspectors
The introduction of a Property Practitioners Ombud will arguably go a long way in consolidating accountability in the property industry, particularly at a consumer level. Furthermore, it acts as a quicker and more efficient forum for Property Practitioners themselves. The only notable caveat for disputes among Property Practitioners is that both parties must consent to it. This arguably makes this dispute mechanism somewhat weaker, and will fail to discourage costly legal disputes and litigation among practitioners.
The issues dealt with by the Ombud will inter alia include: the financing, marketing, managing, letting, hiring, sale and purchase of property.
Property inspectors will have expanded powers to enter premises (excluding private homes) and seize articles without obtaining a warrant. This new power is almost certain to be challenged due to possible infringements on rights.
Under the current Estate Agency Act, The Estate Agency Affairs Board has the power to appoint property inspectors in terms of section 6. The current powers of property inspectors are set out in section 32A of the current act and will remain unchanged with the exception of the above point.
Fidelity fund certificates (hereinafter referred to as “FFC’s”)
Perhaps one of the most substantial changes under the new Bill relates Fidelity Fund certificates.
The new Bill Follows the old Estate Agency Act insofar as a person not in possession of a certificate shall not be entitled to commission or be allowed to practice as an estate agent.
However, it is taken one step further under the new Bill, a property practitioner who is not in possession of a Fidelity Fund certificate must refund a client any remuneration on demand.
Disqualification from the issue of an FCC
All grounds for disqualification from the current act remain in the new Bill
Notably, a five-year time frame has been introduced with regards to offences committed from the date of application for an FFC. If an offence is committed in this five-year period, it shall constitute a ground for disqualification
Where a person is found guilty of an offence involving dishonesty, such an offence shall not constitute a ground for automatic disqualification unless the sanction imposed was having been sentenced to imprisonment without the option of a fine.
Furthermore, persons on National Treasury’s list of tender defaulters shall be disqualified from obtaining an FCC.
Finally, persons not in possession of a valid BBBEE certificate shall be automatically disqualified from being issued an FFC. This is despite the fact that Exempt micro enterprises with turnover of less than R10 Million per annum, are not permitted to be issued a BBBEE certificate. While the inclusion of this provision is undoubtedly a positive step towards tackling transformation in the property industry In its current form, the BBBEE aspect of the bill is problematic in that it contradicts the BBBEE codes of good practice.
Conclusion
The Bill brings a number of mostly positive changes, which will drive transformation and encourage accountability and transparency in the property industry. Once published, the bill will grant greater protection to consumers, as well as bring more categories of people in the industry under control with the expanded definition of property practitioner.
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