Wanting to open your own estate agency firm?
Follow these steps to ensure that you are compliant with regulations:
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.
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.
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.
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.
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.
It is advisable that you obtain the contracts that you need to run your business from a property attorney.