Is the Property Practitioner's Act applicable on certain non-profit retirement villages?

The question arose whether the Property Practitioner's Act, 22 of 2022 is applicable on non-profit retirement villages that manage, rent, and own immovable property for a select market of individuals, namely people above a certain age. These companies will typically provide their clients with an option to buy a "life right", entitling them to accommodation and other services within the retirement village. To answer this question, the definitions of "property" and "property practitioners" in the Act are interpreted in order to reach a conclusion.

Retirement villages that manage, rent, and own immovable property for a select market of individuals, namely people above a certain age, are becoming more and more popular in recent times. These companies will typically provide their clients with an option to buy a "life right", entitling them to accommodation and other services within the retirement village. They don't make use of third parties to market, promote, or render rental services on their behalf and are the registered owners of immovable property, from which they will operate their businesses. They only manage and "sell" life rights in the company-owned property.

The question now arises whether these companies will fall within the ambit of the Property Practitioners' Act 22 of 2022 ("the Act"), i.e., will it be required from them to, among others, –

  • Obtain a Fidelity Fund Certificate;
  • Obtain a Voluntary Disclosure Form (from themselves);
  • Obtain a mandate to sell its own immovable property;
  • Obtain a BBBEE Certificate.

Principles when interpreting statutes/legislation:

The principles to be applied when interpreting legislation are well-established in South-Africa's common law (see Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) and Capitec Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and others 2022 (1) SA 100 (SCA)). It is clear that "consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the apparent purpose to which it is directed, and the material known to those responsible for its production... A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document" (Endumeni-case), and that "the meaning of a contested term of contract (or provision of a statute) is properly understood not simply by selecting standard definitions of particular words, often taken from dictionaries, but also by understanding the words and sentences that comprise the contested term as they fit into the larger structure of the agreement, its context and purpose" (Capitec bank-case) (our emphasis).

Bottom line: Give the words their ordinary meanings and read it within the context of the purpose of the Act to avoid absurd outcomes.

Definitions of "Property" and "Property Practitioners" in the Act:

Section 1 of the Act defines "Property" as "immovable property, and any interest, right or duty associated with it as contemplated in section 2". Section 2 states that the Act "applies to 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".

Section 1 further also provides that "Property Practitioner" –

(a) "means any natural or juristic person 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 which, directly or indirectly, on the instructions of or on behalf of any other person –

  • by auction 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;
  • collects or receives any monies payable on account of a lease of a property or a business undertaking:
  • in any other way acts or provides services as intermediary or facilitator with the primary purpose to, or to attempt to affect the conclusion of an agreement to sell and purchase, or hire or let, as the case may be, a property or business undertaking

(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 timeshare and fractional ownership, in a property or property development

(c) includes any person who for remuneration manages a property on behalf of another;"

(only relevant portions quoted, for emphasis).

So, is the Act applicable or not?

From a simple reading of Section 1(a) above, it would seem that this specific paragraph will exclude the type of retirement villages under discussion from the ambit of the Act, as these companies do not act "on the instructions of or on behalf of any other person" – they act on their own behalf when selling the life rights in question.

However, when reading Section 1(b) as quoted above, the Act seems to then add additional categories of persons on which it will be applicable, namely-

  • any person who sells, whether by auction or otherwise, any portion or right in respect of property notwithstanding whether that person acts under instruction from another; or
  • any person who sells, whether by auction or otherwise, any portion or right in respect of the property on behalf of another person (thus acting on instructions from another).

From a plain reading of the first category mentioned above, it would seem as if the Act will then be applicable on all persons selling immovable property (or a right therein), irrespective of whether they are the registered owner of the immovable property or not. This interpretation will of course have far-reaching implications for owners of immovable property in South Africa, because should a person who owns immovable property seek to sell, for example, its section in a sectional title scheme or its undivided share in its own immovable property, they would then have to comply with the Act. In addition, it would further be expected of the retirement villages under discussion to have to comply with the provisions of the Act in that the life-right that it sells to members of the public in respect of a certain portion of its immovable property would fall under this interpretation of subsection (b).

Such an interpretation would surely, in our view, lead to "insensible and unbusinesslike results or undermine the purpose of the Act", because the retirement villages will then have to, for instance, obtain a Fidelity Fund certificate. Section 35 of the Act records the primary purpose of the fund is to reimburse persons who suffer a pecuniary loss because of theft of trust money committed by a Property Practitioner who was in possession of a Fidelity Fund Certificate, or failure by a Property Practitioner to comply with trust obligations in terms of the Act. It is clear that no person will however suffer any form of a "pecuniary loss" as a result of theft of trust money in circumstances where a natural or juristic person sells his or her own immovable property (or a right therein) to another.

It is therefore our opinion that subsection (b) should be interpreted by also including the words "on behalf of another" (similar to subsection (a)), given the principles of interpretation as discussed above as well as the purpose of the Act, which is to primarily regularise the profession and to protect consumers. It further imports the Fidelity Fund, whose primary purpose is to reimburse consumers who have suffered a pecuniary loss as a result of the actions of property practitioners. Imposing an obligation on "all persons" would not serve this purpose as it would be senseless and unbusinesslike.

Lastly, it is our view that the purpose of subsection (b) in particular is that not only persons who sell the whole of immovable property, but also persons who sell parts, rights, or sections, thereof on behalf of other persons are to be included in the definition of a property practitioner and its primary purpose is to clarify this point.

CONCLUSION:

Even though the Act is clear that all persons who act on behalf of another are obligated to comply with the provisions thereof, it is our view that subsection (b) in particular should be read to include only persons or juristic entities that act on behalf of another in selling sections, or rights in respect of the immovable property. This interpretation would, of course, mean that the Act would not be applicable on the type of retirement villages under discussion. It should however be noted that currently there is no reported case law on the Property Practitioners Act and limited academic material to confirm the above views. It may be advisable to obtain a second opinion or to review this opinion.

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.