EAAB: Agents need to comply with education regulations or be disqualified

MAIN IMAGE: Courtney McKenna, operations manager of PropAcademy; Jan le Roux, CE of Rebosa

A policy approved by the EAAB applicable to interns, non-principal or principal estate agents, has granted an extension of a time frame within which they can ensure compliance with the board’s education regulations.

The EAAB’s practise notice (ETD01/2020) states that these regulations do not apply to persons who want to enter the estate agency sector for the first time or to persons who have never previously applied for, or been issued with, a valid Fidelity Fund Certificate (FFC) by the EAAB. By law estate agents are required to have a valid FFC issued by the EAAB for them to practice.

The notice is applicable to estate agents holding full status FFC’s despite having failed to comply with the requirements of the standard of training of estate agents.

“The  extension is welcome and a deadline  for interns very necessary. It will, however, be impossible for the EAAB to cope with the  increased volumes as it is not coping at present “, says Jan le Roux, CE of Rebosa.

Interns

In the case of interns, the notice is applicable to persons who have continuously been registered as intern estate agents for a period exceeding twenty-four months. They are granted time until 30 June 2022 to submit a completed intern logbook to the EAAB, duly signed off by both the intern agent and the principal or qualifying mentor estate agent. This will serve to assess if the intern was initially issued with an intern FFC during 2013. Alternatively, the intern can submit a letter from a principal of the estate agency where the intern estate agent served the internship to confirm the successful completion of the twelve-month internship period.

The intern should also be certificated against the NQF Level 4 real estate qualification and have passed the PDE 4. Interns who fail to comply with these regulations by 30 June 2022 will be ipso facto rendered disqualified in terms of the Act.

In the case of intern estate agents who have not passed the PDE within two years after having been certified against the NQF Level 4 real estate qualification, are granted until 30 June 2022 to enrol for and pass the PDE 4. Failure to pass will lead to disqualification.

Estate agents

Registered full status non-principal estate agents who have not been certified against the NQF level 4 real estate qualification or who have not passed the PDE45 but who hold a valid FFC, also have until 30 June 2022 to be certificated against the NQF Level 4 real estate qualification and to pass the PDE. If they fail to do so by 30 June 2022, they will be ipso facto rendered disqualified.

Principals

The same regulation applies to registered full status principal estate agents holding a valid FFC but who have not been verified against NQF level 5 real estate qualification or who have not yet passed PDE 5 while failure to comply will also lead to ipso facto disqualified.

Consequences

The consequences of being rendered disqualified in terms of the act, will lead to the person being blocked and unable to renew their FFCs for 2022 or any ensuing calendar years and pay an administrative penalty of R1000.00. The penalty must be paid before any further FFCs will be issued to them.

Agents in these situations can apply to the EAAB under the proviso to section 27 of the Act, for the issue of an FFC for the 2022 calendar year if they can convince the board that it will be in the interest of justice to issue the FFC. This application must be lodged with the EAAB within a period of sixty days after the person concerned is notified of the disqualification. Failure will render the person disqualified.

A disqualified estate agent will remain blocked until:

  • The EAAB has received a substantive application from the applicant in the form of an affidavit, together with all supporting documents necessary or required to enable the application to be duly considered, in which the applicant provides sound and valid reasons as to why the issue of a FFC will be in the interest of justice and
  • the application has been duly considered and approved.

On approval, the estate agent may be unblocked and granted a maximum further six months, calculated from the date of the unblocking of the application, within which to comply with any outstanding educational requirements in terms of the education regulations. No further extensions of time will be granted to the applicant estate agent.

Failure by an applicant to comply with any outstanding educational requirements in terms of these education regulations within the set period, will render that estate agent ipso facto deregistered as an estate agent.

Estate agents who have been deregistered by the EAAB, may reregister, but only in the capacity of an intern estate agent. They will be required to comply with all the requirements pertaining to an intern estate agent. This Practice Note came into effect on 1 July 2021.

Courtney McKenna, operations manager of PropAcademy, an accredited provider of regulated estate agents’ qualifications, education and an RPL assessment centre, welcomes this Practice Notice with open arms and says it is way overdue and will professionalise the industry.

“The EAAB legislated education some 13 years ago but they never fully implemented their checking policies to police this process, resulting in property practitioners trading as full status or principal status agent as reflected on their fidelity fund certificate, where in fact they have not complied with education requirements and intern agents remaining at that status for years past the cut-off date.

“Part of the reason that property practitioners have not complied with education can be put down to their complacency with the Board. The Board’s administrative systems have been unable to issue FFCs timeously, unable to produce regulated CPD courses timeously and the question is asked: “how will they be able to monitor my education status?”

McKenna says all property practitioners must be compliant by end of June 2022 which is going to be a hard task for some. However, there is relief in recognition of prior learning (RPL), where agents will be able to fast-track their learning, terms and conditions apply.

Written by
Danie Keet (Property Professional)

How to Start Your Own Estate Agency

How to start my own estate agency

Wanting to open your own estate agency firm?

Follow these steps to ensure that you are compliant with regulations:

  1. Principal Property Practitioner

Every estate agency firm must have a principal.  A principal property practitioner is an estate agent who has completed his 12-month internship, his NQF4, his PDE4, his NQF5.  He then has 2 years to complete his PDE5 exam whilst trading as a principal estate agent.  His fidelity fund certificate (FFC) clearly states “Principal Estate Agent”.

If you are a newcomer to the industry and believe that you will be found exempt from your NQF4 and NQF5 qualifications, you will still be obliged to complete your 12-month internship and write both your PDE4 and PDE5 exams.

If you need to know more about the Estate Agents Affairs Board (EAAB) education regulations, please read our free easy-to-follow download.

The principal property practitioner is solely liable for any misrepresentation or non-compliance of the firm and of all agents employed by the firm.

  1. Estate Agency Entity

You will need a vehicle within which to run your business and this can be done in the form of a Sole Proprietorship or a Pty Ltd company.  If you have a shelf Close Corporate (cc) you could use that but cc’s are no longer allowed to be formed in South Africa.

We suggest that you discuss the requirements of your entity with your accountant to find the best option for your application.  If you are including business partners as shareholders, it would be best to open a company to house this.

You must let your accountant know that the name of the business must be approved by the EAAB prior to reserving it with CIPC.  To reserve your name with the Board click “reserve a new agency name” on their website.

  1. Bank Accounts

The EAAB regulates that you must open a Trust Account which must be correctly designated in accordance with The Estate Agents Affairs Act.  This means that the name of the bank account must reflect:  “Name of Business t/a Trading Name Trust Account in accordance with The Estate Agents Affairs Act 117 of 1976”.  If this is not reflected, you will incur a penalty and be sanctioned.  As we all know, Trust Accounts must balance to the cent daily, and are used to house the public’s money which consists of deposits on sales/rentals and any other money the estate agency may want to hold pending a lease or sale being concluded.  Most estate agency firms include a clause in their contracts stating that the monies will be held in the attorney’s trust account.

When a client pays monies into the estate agency current account, the monies being held on behalf of the client must be immediately transferred to a trust account, failing which the estate agency will be sanctioned.

You must also open a current account and may also want to hold a credit card.

  1. EAAB Registration Compliance

All property practitioners employed by your firm, all directors, principal agent and the firm itself must register with the Board, obtain FFC’s and comply.  Trading may not occur without FFC’s being issued and displayed in the registered office of the business. Any person in the agency who is liaising with buyers/sellers/tenants/landlords and discussing property/finance matters must hold a valid current FFC.

If the firm is not compliant in any manner, then all the agents are not compliant and all FFC’s will be disqualified.  If an agent in the firm is not compliant then the firm is not compliant.

To register the following applies:

  • Firm: Application form, proof of payment of registration fee, CIPC documents, directors information, letter from bank stating that the Trust Account is open and correctly designated
  • Estate Agents: Must all be registered and comply. Required application form, proof of payment of registration fee, ID, letter of employment at firm signed by Principal.
  • Directors: Must all be registered as estate agents and comply with the Boards requirements;
  • Shareholders: Do not have to register as an estate agent.
  • Non-Executive Directors: Must register as estate agents but do not have to comply with the Boards education requirements. These directors are not involved with the firms Trust Account, Estate Agents or the Public.  They could be investors in the business or involved in aspects of the business other than property, ie HR.

Registration requirements may change, and it is best to find these requirements on the Boards website.

Audits

The EAAB inspector randomly audits estate agencies to check their compliance in the following:
Financial: Audit of trust account to be submitted 4 months from date of year end
Interest on deposits: in Trust account to be allocated according to regulation
Contracts of sale and lease: to be contained on file with all FICA requirements and FICA reporting system
Agents: Education compliance
The following must be displayed in your registered office:  EAAB Code of Conduct, Property Practitioners Act, Fica Reporting Officer, FFC’s of all agents and directors and firm

PropAcademy sell an easy to follow course, Pre Audit Evaluations which detailing all EAAB compliance requirements.

Policies and Procedures

It is advised that all estate agencies hold a Company Policy Document covering all aspects of their agency.

Contracts

It is advisable that you obtain the contracts that you need to run your business from a property attorney.

Differences Between the Old and New Property Practitioners Act

The New Property Practitioners Act for Estate Agents

The new Property Practitioners Act, which will replace the current Estate Agency Affairs Act, was passed by the National Assembly and the National Council of Provinces, signed off by our President and, at time of writing, is awaiting only for stakeholders to be invited to comment on the Regulations, and then it will be gazetted.  Once gazetted the advert will give the effective date of the Act.

In terms of the new Act, the Board of Authority (the old EAAB or Estate Agency Affairs Board) will have to issue a new Code of Conduct to bring Code in line with the provisions of the new Act. In addition, the new Act will be accompanied by a set of Regulations that have yet to be published.

PropAcademy has not yet had sight of the Bill as passed, and so we do not yet know if the final version that will be signed into law by the President contains any changes to the earlier version of the Bill.

However, some of the provisions of the new law envisaged in the latest version of the Property Practitioners Bill we have seen contains some far-reaching changes for the property industry. We have therefore put together this guide to give you an indication of the changes you can expect. As soon as we know the precise contents of the new Act, we will update this blog. We therefore urge you to approach this blog in the spirit in which it is intended: as an opinion piece rather than a definitive interpretation of the new Act.

Many of the key differences between the old and new Acts will be changes in the terminology used in the profession.

  • Estate Agency Affairs Act (1976)
  • Intern Estate Agent
    Full Status Estate Agent
    Principal Estate Agent
  • Estate Agents Affairs Board
  • Fidelity Fund
  • Property Practitioners Act (2019)
  • Candidate Property Practitioner
    Property Practitioner
    Principal Property Practitioner
  • The Board of Authority (which falls under the Property Practitioners Regulatory Authority)
  • Property Practitioners Fidelity Fund

The Bill (before it was passed by the two houses of Parliament) also contained significant changes regarding who is to be subject to the provisions of the Act and who isn’t.  This is important and if any changes were made in the draft Bill, they were likely to be made here.

Who is subject to the Act’s provisions:

1.

  1. Sales & Rental Agents. The only change envisioned in the new Act will be that mandatory disclosure forms must be included in sale and rental agreements. If not, then the agreement will be interpreted as if no defects or deficiencies were disclosed.
  2. Auctioneers. Again, the only change will be to the inclusion of the mandatory disclosure forms for Auctioneers in the same way as for Sales and Rental Agents.
  3. Business This is new. Business brokers, who were excluded from the provisions of the old Act, must now comply with the Property Practitioners Act. This refers specifically to the marketing, promotion, managing, sale, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.
  4. Managing In terms of the new Act, a Managing Agent is anyone who “collects or receives any monies payable on account of a lease of a property or a business undertaking; (and who) provides, procures, facilitates, secures or otherwise obtains or markets financing for or in connection with the management (of a property)”. Managing agents must comply with all the provisions of the new Act.
  5. Bridging Another new role brought within the ambit of the Act. They too must comply with its provisions.
  6. Bond The issue around Bond Originators is a little unclear at this stage. Because Bond Originators are included in the Financial Sector Regulation Act, the presumption was that they would be exempt from the provisions of the Property Practitioners Act. However, in terms of the version of the Bill we have seen, they are also included. We anticipate clarification of this either as part of the Act, or the new Regulations.
  7. Timeshare and Fractional These type of property transactions are now also covered by the Act.
  8. Attorneys and Candidate Attorneys are exempt as long as they are acting as lawyers (rather than as Estate Agents) and working from their own business premises. That means that if they sell a property as part of a Deceased Estate or Litigation, they do not need to comply with the Act.
  9. Developers. Unless a developer is a natural person selling his or her own property, all Property Developers must comply with the Act.
  10. Trusts. The new Act also includes those Trusts that do the work of a Property Practitioner – that is buys, sells, lets or auctions a property on its own.

2. While many people and businesses are not included and must comply with the Act, there are several who are now specifically excluded. These include

  1. Attorneys and Candidate Attorneys can perform estate agent activities without registering with the Authority if he operates in the name of, from the premises of, and in the course of his law firm only.  As soon as he operates a separate estate agency, advertises under another name, has employees who advertise under another name, operates from a different address, then he is required to register as an estate agent and comply with all aspects of the Act.  His employees are also liable for compliance with the education requirements of the Act.  An example of an exclusion would be if the attorney sells a property from an Estate that he is winding up.
  2. Sheriff of the Court
  3. Natural persons selling their own properties

There are also new requirements relating to Fidelity Funds. The most important of these are:

3. Fidelity Funds will continue to run under the Property Practitioners Fidelity Fund.

  1. The running costs of the Board of Authority (which replaces the old EAAB) including insurance premiums will also be paid from this fund.  In addition, the Authority can issue funds from the Fidelity Fund for:
    a) research in field of activity relevant to property practitioners;
    b) maintenance and promotion of the standard of conduct of property practitioners;
    c) grants for education and training, and
    d) transformation.
    We presume that these additional expenses will come into effect once a fund is set for potential claims from the public against insurance claims.
  2. Current Fidelity Fund Certificates (FFCs) must be displayed at the registered office of the Property Practitioner. Expired FFCs may not be displayed.
  3. The Authority must issue a FFC within 30 days. Failure to do so will result in the application deemed to have been approved and the Authority must upon written request by the applicant produce the certificate within 10 days.
  4. A five-year moratorium is to be applied to all prior contraventions of the Act. In other words, if the agent/agency contravened the Act five or more years ago, it can no longer be held against them.
  5. A conveyancer may not pay any remuneration or other monies to a property practitioner unless that property practitioner has provided the conveyancer with a copy of their Fidelity Fund certificate, valid at date of sale.

We have also listed some of the other changes of note in the Bill (which may or may not be included in the Act as promulgated):

  1. Inspectors appointed by the Authority will have the power to enter and inspect any business premises of a property practitioner without a warrant.
  2. Non-Executive Directors. There has been no change to the status and duties relating to non-executive directors. They may not be involved in the operations of the agency other than in departments that do not deal in property or with the public. They must hold a FFC and are exempt from education compliance.
  3. Ombudsman.  The new Act will make provision of a Property Practitioners Ombud Office  to be established. This will be a Section 21institution, similar to that of the Public Protector.
    The Property Practitioners Ombuds Office will consider and dispose of complaints lodged in terms of the Act in respect of the financing, marketing, managing, letting, hiring, sale and purchase of the property and to provide mechanisms for the resolution of those complaints.
  4. Language of Contracts. A purchaser/tenant/lessor/seller can request the agreement to be in any one of South Africa’s official languages, and this must be supplied by the seller.  Samples of contracts in all languages will be available on the Authority’s website.  An agreement is defined as a mandate, lease or sale agreement.
  5. Transformation. It seems that Human Settlements Minister Nomaindia Mfeketo wants to see the involvement of more black people in the property industry. One way in which this is to be achieved, is for all State institutions to be permitted to utilise the goods and services of only those property practitioners who comply with the Broad Based Back Economic Empowerment and Employment Equity legislation and policies.
  6. Grants. The Authority may authorise grants for various purposes, including: research, the maintenance and promotion of the standard of conduct of property practitioners; maintenance and promotion of the training standards of property practitioners; the education and training of property practitioners; the transformation of the property sector, and others.
  7. Automatic disqualifications A few new disqualifications have been added to the existing list. For example, to apply for a FFC you must have a Tax Clearance Certificate and a BEE Certificate.  You will also be disqualified if you are on the Treasury tender defaulters list.
  8. Record keeping You are required to keep all correspondence, legal agreements, copies of advertising and marketing materials for 5 years.  These can be stored electronically.
  9. Trust Account exemptions will be considered to assist transformation into the industry.  These will be determined on their merit and will be for a set period only.  Where annual income for any estate agency practice is R2.5m or below, the Trust Account no longer requires an audit from a registered auditor, the firm must ensure that their annual financial statements are signed off by a registered accountant.

We will be keeping an eye open for the gazetting of the new Property Practitioners Act and will update this blog with any changes should this be necessary.

If you have any questions or you would like to share your own experiences with the Property Practitioners Act, please feel free to post them in the comments below.