The Property Practitioners Act: How can it assist you?

May 1st, 2023
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The Property Practitioners Act 22 of 2019 (the Act) came into operation on 1 February 2022. It has replaced the Estate Agency Affairs Act 112 of 1976. The Act has a wider application than the Estate Agency Affairs Act, as it is not limited to estate agents only, but it refers to a broader category of persons, including estate agents, auctioneers, leasing agents, homeowners’ associations, body corporates, time share sales agents and developers, as referred to as property practitioners in the Act.

In terms of this Act, a Property Practitioners Regulatory Authority (the Authority) has replaced the Estate Agency Affairs Board. Their primary objective is to provide more protection for the consumer when they are selling, purchasing, leasing, hiring, or financing immoveable property or a business undertaking. Other objectives are –

  • transformation of the property sector to ensure inclusivity;
  • provide consumer awareness programmes around property transactions;
  • provide a dispute resolution mechanism in the property market; and
  • to continue with the provision of the Estate Agents Fidelity Fund in the form of the Property Practitioners Fidelity Fund.
The powers of the Authority

The Authority has been given extensive powers to ensure they are successful at implementing their objectives. These comprise of the right of the Authority to appoint inspectors to ‘enter and inspect the business premises of any property practitioner’, their records, accounts and or documents. Inspectors may on authority of a warrant enter and search premises, request information, take extracts from books, documents, or computers, and seize and remove any of the aforementioned (Schindlers ‘The Property Practitioners Act’ (www.schindlers.co.za, accessed 1-4-2023)). ‘The inspector may be accompanied by a police officer who may use necessary force to enter a premises’ (Schindlers (op cit)).

The Authority may, where an inspector on investigation finds a contravention of the Act and such contravention is of a minor nature, issue a compliance notice calling for compliance within a reasonable time, or issue a fine where sanctioned in the Act. ‘A portion of a fine imposed, may be applied toward the payment of compensation to any person who suffered a loss as a result of the conduct of a [property] practitioner’ (Schindlers (op cit)).

‘Any person may lodge a complaint to the Authority on the prescribed form’ against a property practitioner relating to their transaction (Schindlers (op cit)). ‘The Authority may refer a matter for mediation if it believes the complaint can be resolved this way’, or by adjudication, if mediation is not successful (Schindlers (op cit)).

The Property Practitioners Fidelity Fund (the Fund) 

‘The Fund established in terms of the Estate Agency Affairs Act, known as the Estate Agents Fidelity Fund will continue to operate as if it were established under the Property Practitioners Act and will be known as the Property Practitioners Fidelity Fund. The purpose of the Fund is to reimburse persons who suffer pecuniary loss due to [a Property Practitioner’s] theft of trust money’, failure to open a trust account, or failure to retain money in a trust account until lawfully entitled to pay the money to a third party (Schindlers (op cit)). The consumer has a period of three years from the date the incident gave rise to the claim, to request for compensation against the Authority for non-compliance by the property practitioner. ‘The maximum pay out from the Fidelity Fund to any claimant in respect of each cause of action is R 2 000 000’ (Schindlers (op cit)). It is envisaged that due to this sum being low, and the high values involved in many property transactions, the Minister of Human Settlements has been provided for the Authority to oblige property practitioners to obtain further insurance to indemnify consumers for possible losses that may be sustained during a transaction.

Every property practitioner must on request produce a copy of their Fidelity Fund Certificate on request from any relevant party. ‘No person who has not been issued with a valid certificate may act as a property practitioner’ (Schindlers (op cit)). ‘Conveyancers may not pay any remuneration to property practitioners unless they have been provided with a valid Fidelity Fund Certificate’ of the practitioner, and the business where the practitioner is employed (Schindlers (op cit)).  These certificates are required to be valid at the time of performance of the transaction, and date of payment of the commission.

‘In the absence of a Fidelity Fund Certificate, a property practitioner must immediately upon receipt of a written request from a relevant party, repay any amount received in respect of’ any property transaction during the period of the contravention (Schindlers (op cit)).

The property practitioner’s commission and industry regulation

A property practitioner may not obtain his commission for the sale of immoveable property negotiated by him, prior to registration of the transfer of the property into the name of the purchaser. However, if good cause is shown to exist, and the purchaser has prior to signature of the sale agreement consented in writing to such payment, then the property practitioner may obtain this commission. Such a document must contain an explanation of the implications and financial risks of such payment.

‘The conduct of property practitioners with regards to relationships with other property market service providers is regulated. … A [property] practitioner may not enter into an arrangement formally or informally whereby a consumer is obliged or encouraged to use a particular service provider, including an attorney. A contravention of this could result in any remuneration earned being repaid to the consumer. The service provider can in addition be required to repay any remuneration received with interest’ (Schindlers (op cit)).

Prohibited business practices

The Minister has declared the following business practices as prohibited in the regulations to the Act:

An arrangement made by a party that manages any residential property development, including a body corporate or a homeowners’ association whereby they receive a reward for marketing properties in that property development.

‘Arrangements requiring that any property in that property development may only be sold through the … agency or a property practitioner designated by [it]’ (Jean Herbert and Nicholas Moss ‘Real change to the real estate industry: How does the Property Practitioners Act affect your firm?’ (www.dmllaw.co.za, accessed 1-4-2023)).

‘Arrangements requiring that any property in the property development may only be disposed of to the residential development or a person or entity designated by [it]’ (Herbert and Moss (op cit)).

Any other arrangement that obliges the use of specific services relating to a property, which results in an unfair advantage to a particular property practitioner for example, when a seller of a property is obliged to use the services of a particular conveyancer.

Mandatory disclosure form 

‘A property practitioner may not accept a mandate to sell or lease [a property] unless provided with a fully completed and signed mandatory disclosure form … . This form must be provided to every purchaser or lessee who makes an offer to purchase or lease.

The disclosure document must be signed by all relevant parties and annexed to the agreement. If not completed, signed and annexed, the agreement must be interpreted as if there were no defects or deficiencies on the property disclosed to the purchaser. Failure by a property practitioner to comply may result in [the practitioner] being held liable by an affected consumer’ (Schindlers (op cit)).

What are the penalties if the Act is not followed?

‘Any property practitioner in contravention of the Act’ may be sanctioned by the Authority ‘to repay any fees received for a property transaction’, having their Fidelity Fund Certificate withdrawn, being issued with a fine, noting the transgression on the Authority’s website, and/or face imprisonment for a maximum period of ten years by a court of law (Justine Krige ‘The Property Practitioners Act: What is it all about?’ (www.cliffedekkerhofmeyr.com, accessed 1-4-2023)).

This Act has far reaching measures to protect the lay person in what may be one of the most expensive or complex transactions that they may deal with during their lifetime, namely,  purchasing or selling a property. One should be mindful of one’s rights to ensure that the transaction is conducted in a legal and ethical manner by a property practitioner, and should one encounter concerns relating to theft, misuse of funds, negligence etcetera, one has the right to contact the Authority to assist.

Shaaheda Hoosein BA (UKZN) BProc (Unisa) is a legal practitioner at Gwina Attorneys in Johannesburg.

This article was first published in De Rebus in 2023 (May) DR 13.

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