South Africa: Summary Of The Property Practitioners Bill, 2016

Last Updated: 17 August 2017
Article by Maryna Botha

The Bill was published on 31 March 2017 in Government Gazette 40733 Notice Number 246 and the Department of Human Settlements calls for submissions and feedback within 30 days of the date of publication/for public comment.

The notes below are summaries of the most relevant of the practical provisions for estate agents and other property practitioners. The details of the structure of the new Board, its employees and the like are not dealt with.

A – Who does the Act apply to? I.e., who are property practitioners?

The term 'property practitioner' is defined to include estate agents, rental agents, mortgage originators, property inspectors, valuators (in certain instances), property managers and more. The definition is 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);

B – In what instances will the Act apply?

The Act applies to property practitioners as defined and in 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.

It is possible to apply for exemption (sec 4) from the application of the Act.

C – New regulatory body replacing the EAAB

A new regulatory body is established which will replace the Estate Agency Affairs Board. The new body is the Property Practitioners Regulatory Authority and will be governed by and act through its board which will be known as the Board of the Authority.

The Authority must regulate the conduct of the property practitioners in dealing with the consumers in so far as marketing, managing, financing, letting, renting, hiring, sale and purchase of property are concerned; and generally ensure that the Act is complied with. It must also implement measures to ensure that the property sector is transformed.

D – An Ombud

A Property Practitioners Ombuds Office is established to consider and dispose of complaints lodged in terms of the Act in respect of the financing, marketing, managing, letting, hiring, sale and purchase of property and to provide mechanisms for the resolution of those complaints.

E – Appointment of inspectors and compliance notices

The Authority ay appoint inspectors to determine whether the Act is being complied with. The inspector may at any reasonable time and without prior notice, conduct an inspection and may without a warrant:

(a) enter and inspect any business premises of a property practitioner;

(b) require the property practitioner, manager, employee or an agent of the property practitioner to-

(i) produce his or her fidelity fund certificate and/or any book, record, or other document related to the inspection and in the possession or under the control of that property practitioner, manager, employee or agent; or

(iii) furnish him or her with such information in respect of the fidelity fund certificate, book, record or other document at such a place and in such manner as the inspector may determine;

(c) examine or make extracts from, or copies of, any such fidelity fund certificate, book, record or other document; and

(d) seize and retain any such fidelity fund certificate, book, record or other document that may afford evidence of sanctionable conduct under this Act.

If the inspector obtained a warrant from a judge or magistrate, then he/she has wider search and inspection powers.

The Minister is obliged to publish notices regarding recurring minor as well as serious offences and must prescribe fines in respect thereof. A person who fails to comply with a compliance notice is guilty of an offence.

F – FUNDS OF THE AUTHORITY/FEES PAYABLE TO THE AUTHORITY

The Authority will be funded from (a) monies appropriated by Parliament; (b) fees paid to the Authority by property practitioners; (c) all monies derived from any investments; and (d) all other monies which may accrue to the Authority from any other source.

G – FIDELITY FUND AND POSSIBLE INDEMNITY INSURANCE

The Estate Agents Fidelity Fund (in terms of the Estate Agents Affairs Act) will continue to operate under the name Property Practitioners Fidelity Fund. The running costs of the Authority including insurance premiums will also be paid from this fund.

The primary purpose of the fund is to reimburse persons who suffer financial loss as a result of –

(a) theft of trust money committed by a property practitioner who was in possession of a Fidelity Fund certificate at the time of the theft; or

(b) the failure by a property practitioner to apply timeously or to make payment for, his or her Fidelity Fund Certificate.

Anyone seeking to claim from the Fund must give notice thereof to the Fund within three years after the claim arose.

No-one can claim against the Authority in respect of theft of trust money by a property practitioner unless such a person has, before lodging a claim with the Authority, laid a criminal charge against that property practitioner.

The Minister may put a cap on the amount that the fund may pay out in respect any type of claim.

No person may commence any action against the Authority for payment from the Fund later than three years that the Authority indicated that it rejected the claim.

A claimant will not be able to claim any amount larger than the difference between the amount of the loss suffered and the amount s or other benefits received from another source (such as insurance).

No right of action lies against the Authority in respect of:

(a) any loss suffered by a business partner or the immediate family of a property practitioner by reason of any negligent or intentional conduct including theft committed by such property practitioner;

(b) any property practitioner by reason of any negligent or intentional conduct including theft committed by his, her or its business partner or employee;

(c) any person as a result of negligent or intentional conduct including theft, or as a result of any other act or omission in connection with trust monies held or received on account of any other person.

The Authority may in the public interest arrange any group insurance scheme with any insurer registered as a short-term insurer in terms of the Short-term Insurance Act for the provision of insurance to cover property practitioners' liability to members of the public on the grounds of malpractice, up to an amount determined by the Board.

H – GRANTS

The Board may authorize 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.

I – FEES PAYABLE BY PROPERTY PRACTITIONERS

A property practitioner must annually pay to the Fund the prescribed application fee for a Fidelity Fund certificate and any further amount that the Minister may, determine from time to time.

The fee for the Fidelity Fund Certificate must escalate yearly in accordance with the method or calculation determined by the Minister. A new determination must be made every five years.

J – Fidelity Fund certificate

Every property practitioner must annually apply to the Authority for a Fidelity Fund certificate and such application must be accompanied by the prescribed fees. Of the application is late or the fee payment not made, then the property practitioner will be liable for a penalty and the certificate will not be issued unless the penalty is paid. If any contact details of a property practitioner changes in the course of a year, then the practitioner must provide the Authority with the new details within 14 days.

Certain disqualifications apply, one of which is the failure to submit a valid BEE certificate or not to have the required qualifications.

The Authority must supply the certificate within 30 days, failing which it is deemed that the application for the certificate was compliant and the practitioner may then make demand for the issue of the certificate within 14 days.

No-one may act as a property practitioner unless he or she or it is in possession of a Fidelity Fund certificate, or if he or she or it employs any other person as a property practitioner, that person is also in possession of a Fidelity Fund certificate.

If an entity is a company, close corporation, a trust or a partnership, then every director of such a company, every member of such a close corporation, every trustee of such a trust and every partner of such a partnership, as the case may be, must be in possession of the Fidelity Fund certificate.

A person who contravenes this requirement must immediately upon receipt of a request from any relevant party in writing repay any amount received in respect of or as a result of any property transaction during such contravention.

The Fidelity Fund certificate must be displayed at all times and must be referred to on all letterheads and marketing material. A conveyancer may not pay any monies to a property practitioner unless he or she received a copy of the practitioner's certificate.

K – TRUST ACCOUNT

Every property practitioner must open and keep one or more separate trust accounts, which must contain a reference to section 53 of the Act and must appoint an auditor.

L – CODE OF CONDUCT AND UNDESIRABLE PRACTICES

The Minister must issue a (new) Code of Conduct for all property practitioners and may also issue a list/guideline on undesirable practices.

M – STRUCTURE OF THE ACT

T: The structure of the Act

CHAPTER 1: DEFINITIONS, APPLICATION, OBJECTS AND ESTABLISHMENT OF AUTHORITY

  1. Definitions
  2. Application of Act
  3. Objects of Act
  4. Exemption from Act
  5. Establishment of Authority
  6. Functions of Authority

CHAPTER 2: BOARD OF AUTHORITY

  1. 7 Composition and appointment of Board
  2. Disqualification from membership of Board
  3. Powers and duties of Board
  4. Good governance and code of ethics
  5. Conflict of interest of members of Board
  6. Termination of membership of Board
  7. Meetings of Board
  8. Committees of Board
  9. Dissolution of Board

CHAPTER 3: CEO AND STAFF OF AUTHORITY

  1. Appointment of CEO
  2. Staff of Authority
  3. Conflict of interest of employees
  4. Delegation

CHAPTER 4: ESTABLISHMENT, APPOINTMENT, RESOURCES, POWERS AND DUTIES OF OMBUD

  1. Establishment of Property Practitioners Ombud Office
  2. Appointment of Ombud
  3. Staff and resources of Ombud
  4. Lodging of complaints
  5. Mediation
  6. Adjudication
  7. Accounting and reporting by the Ombud

CHAPTER 5: COMPLIANCE AND ENFORCEMENT

  1. Appointment of inspectors
  2. Powers of inspectors to enter, inspect, search and seize
  3. Compliance notices
  4. Fine as compensation

CHAPTER 6: FINANCES

  1. Funds of Authority
  2. Financial year and deposits

CHAPTER 7: PROPERTY PRACTITIONERS FIDELITY FUND

  1. Property Practitioners Fidelity Fund
  2. Primary purpose of Fund
  3. Control and management of Fund
  4. Claims from Fund
  5. Payments from Fund
  6. Authorisation of grants
  7. Indemnity insurance
  8. Fees payable by property practitioner
  9. Co-operation by claimant
  10. Actions against Authority in respect of Fund
  11. Application of insurance monies
  12. Transfer of rights and remedies to Authority
  13. Fund exempt from insurance laws

CHAPTER 8: PROPERTY PRACTITIONERS

  1. Application for Fidelity Fund certificate
  2. Prohibition on rendering services without Fidelity Fund certificate
  3. Mandatory time periods for issuing certificates
  4. Disqualification from issue of Fidelity Fund certificate
  5. Amendment of Fidelity Fund certificate
  6. Withdrawal or lapse of Fidelity Fund certificate
  7. Mandatory display of Fidelity Fund certificate
  8. Trust account
  9. Duty of property practitioner to keep accounting records and other documents
  10. Property practitioner not entitled to remuneration in certain circumstances
  11. Mandatory indemnity insurance
  12. Limitation on relationships with other property market service providers
  13. Insolvency or liquidation of property practitioner

CHAPTER 9: CONDUCT OF PROPERTY PRACTITIONERS

  1. Application of Chapter 8 and Chapter 9
  2. Property practitioners code of conduct
  3. Sanctionable conduct
  4. Undesirable practices
  5. Supervision of candidate property practitioners
  6. Franchising
  7. Prohibition on conduct to influence issue of certain certificates

CHAPTER 10: CONSUMER PROTECTION

  1. Mandatory disclosure form
  2. Language of agreements
  3. Consumer education and information

CHAPTER 11: GENERAL

  1. Property sector transformation
  2. Regulations
  3. Penalties
  4. Delegation of powers by Minister
  5. Legal proceedings against Authority
  6. Use of name of Authority
  7. Transitional provisions
  8. Repeal and amendment of legislation
  9. Short title and commencement

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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