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, is expected to be promulgated soon. It has been passed by the National Assembly and the National Council of Provinces and, at time of writing, is awaiting only the signature of the President of South Africa for it to become law.

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.

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