On the 2nd of October 2019, the President of South Africa, Cyril Ramaphosa, signed the Property Practitioners Bill. In terms of section 77 of the said Bill, this Act will come into operation on the date fixed or decided by the President, by means of a proclamation in the Gazette. Until this is done the Bill has no operating effect and does not apply to anyone or anything.
Once the Bill is approved by Government it will have a great impact on the real estate industry. When the time comes that this bill becomes operational it is intended to replace the Estate Agency Affairs Act 112 of 1976.
The objective of this Bill is to provide for the transformation of the property practitioners sector; to accelerate the transformation of the public sector; to improve the regulation of the property market; to regulate property practitioners and estate agents; to provide for the establishment of the transformation fund; to provide for the establishment of the research centre on the transformation; to ensure that there is compliance with the provisions of the Act and to ensure that the rules and regulations are being properly enforced; to provide for the continuation of the Estate Agency Fidelity Fund but as the Property Practitioners Fidelity Fund; to provide consumer protection to individuals purchasing property; and to repeal the Estate Agency Affairs Act 112 of 1976.
In other words, this Bill seeks to make the process of buying and selling property better and easier. It seeks to protect the rights and interests of individuals who want to buy or sell or lease property. It provides rules and guidelines on how things should be conducted in the real estate business. And it extends certain powers, in respect of immovable property, to individuals who previous did not have such power. It makes provision for opportunities that were previously only available to estate agents. Because of this Bill a wide range of individuals can now act as practitioners where immovable property is concerned.
The Property Practitioners Bill is applicable to the marketing, promoting, managing, selling, letting, financing and purchasing of immovable property. The bill applies in respect of rights, powers, obligations, duties in connection with such property.
According to Section 1 of the Property Practitioners Bill, the definition of Estate Agent/Property Practitioner includes:
- Anyone who provides or markets bridging finance;
- Anyone who is a bond broker or mortgage originator;
- Anyone who lets or hires a property or manages or negotiates the transaction;
- Anyone who collects or receives any money payable in respect of a lease or a property;
- Anyone who assesses property to determine defects as part of a conclusion of the agreement to sell, purchase, hire, or let property;
- Anyone who sells markets promotes advertises properties which include time share and development;
- Anyone who manages property on behalf of another for payment;
- Anyone who is employed by a property practitioner.
The Bill however does NOT apply to:
- Persons who do not attend to property transactions in the ordinary course of their business;
- Persons selling their own property;
- Candidate attorneys;
- The sheriff of the court
The differences between the Estate Agency Affairs Act and the Property Practitioners Bill are:
- The Estate Agency Affairs Act regulates the business of only estate agents and agencies. It is very restrictive in that it only affords rights and powers to estate agents.
- The Property Practitioners Bill extends rights and powers to all practitioners who fit the description in Section 1, above.
- The Estate Agency Affairs Act prohibits persons from acting as an estate agents or offering services of an estate agency if not in possession of a Fidelity Fund Certificate. If a person is not in possession of a current Fidelity Fund Certificate, then such person is not entitled or allowed to receive a commission (payment).
- The Property Practitioners Bill still applies this provision because no one should act as a Property Practitioner or offer such services without a valid Fidelity Fund Certificate. This Bill also requires that any remuneration earned by a Property Practitioner during which time he or she was not in possession of a Fidelity Fund Certificate must be refunded to the person who provided the remuneration, upon demand.
- In the Estate Agency Affairs Act there was an important condition that had to be met. This condition was that estate agents must have earned a form of gain or reward for their services.
- According to the Property Practitioners Bill this condition no longer applies, therefore anyone who performs the functions in Section 1 of the Property Practitioners Bill; without receiving any gain or reward is still a Property Practitioner and is subject to the regulatory requirements of the Bill. Such person must comply with and act in accordance with these requirements.
The Property Practitioners Bill has an objective to bring positive opportunity but not all the provisions of the Property Practitioners Bill are positive in fact, the following provisions are expected to cause some displeasure.
- Property Practitioners are required to be in possession of a Tax Clearance Certificate. This seems unfair because if an individual has an issue with SARS they might not be able to get the needed Tax Clearance Certificate and then such individual would be disqualified from being issued with a Fidelity Fund Certificate making it very difficult to conduct business in the real estate industry.
- If the name of any person, who intends to practice as a property practitioner, appears on the Treasury Tender Defaulters list as a provider, director, member, trustee, partner or shareholder such person would be disqualified from obtaining the same Fidelity Fund Certificate.
- The Property Practitioners Bill necessitates that correspondence, legal contracts, copies of advertising and marketing resources must be retained for 10 years.
- Section 67 of the Property Practitioners Bill provides that, a Property Practitioner must not accept a mandate unless a lessor or seller of the property has provided him with a completed and signed Mandatory Disclosure Form.
- The practitioner must provide a copy of the completed Mandatory Disclosure Form to a potential lessee or purchaser who intends to make an offer to lease or buy the property.
- All the parties must sign the Mandatory Disclosure Form. The Mandatory Disclosure Form is an essential part of the sale or lease agreement.
- If the Mandatory Disclosure Form is not completed, signed or attached, the agreement must be interpreted and presumed to mean that no defects (latent or patent defects) or deficiencies in the property were disclosed or made known to the purchaser. If a Property Practitioner fails to obtain a completed Mandatory Disclosure Form the seller or lessor, the Property Practitioner may be held liable by the consumer affected.
What section 67 means is that if the Property Practitioner did not make the consumer aware of the damages or risk areas of the property before selling the property to the consumer then the Property Practitioner can be held responsible for any loss or damage that the consumer suffers as a result of the damaged property.
- The Property Practitioners Regulatory Authority will be the new Regulatory Body of Property Practitioners. It will be governed by; and will act by means of the Board of the Authority. This Authority will replace the Estate Agency Affairs Board and will be financed by Government fees paid by Property Practitioners.
- Section 68 of the Bill provides that, an agreement to sell or lease; and the Mandatory Disclosure Form must be drafted by the seller or developer for his or her own account. The Authority must publish updated Guideline Agreements and Template Examples on its website on a regular basis. This is done to help consumers to know what fair and valid contracts and forms should look like.
- Section 69 of the Bill states that, the Authority must provide campaigns to educate and advise the general public of their rights in respect of property transactions; and property practitioners of their functions, duties and obligations.
According to Section 69(2) of the Bill, the Property Practitioner is obliged to act in accordance with a duty of care. There is, however, no matching or reciprocal duty of care on the other party (purchaser or lessee).
- This ‘Duty of Care’ means that Property Practitioners are not allowed to enter into any arrangements, in terms of which a consumer/purchaser/lessee is obliged or motivated to make use of a specific service provider, such as an attorney, to render any services in respect of any transaction of which that Property Practitioner was the direct cause. Contracts of this nature are illegal, and the Minister is also entitled, by way of regulation, to prohibit other relationships that could harm the consumer/purchaser/lessee.
- The penalty for violating this rule is that the Property Practitioner is not entitled to be paid their commission, and the other party (attorney), will not be entitled to charge their fee. Even if the commission/fees have been paid, the consumer would be entitled to reclaim payment, and if the Property Practitioner or other party (attorney) does not pay this amount within 30 days, they would be guilty of an offence in terms of the Act.
- Property Practitioners are not entitled to receive payment from two persons who are involved in the same transaction, whose interests are not the same, unless these parties agree to this in writing. This means that if you want to be paid commission from both the seller and the buyer, then both these parties must agree to this in writing.
- If you fail to give a complete explanation, in writing, of any act performed as a Property Practitioner, within 30 days of being requested to do so by the Property Practitioners Regulatory Authority, this amounts to an offence.
- If the Property Practitioners Regulatory Authority asks for information which they need to exercise their powers under the Act, you must provide this information within the period that they specify, or you will be guilty of an offence.
- It is also an offence if you fail to notify the Property Practitioners Regulatory Authority within 14 days of a change in your contact details; or if you discriminate against any person.
- If you are found guilty of an offence, the Property Practitioners Regulatory Authority can withdraw your Fidelity Fund Certificate, you could be liable for a fine, or you can be sentenced to imprisonment for a period not exceeding 10 years, and the details of your transgressions will be branded on the ‘Property Practitioners Regulatory Authority’ website.
In a nutshell, this is what the Property Practitioner Bill presents. Before the laws can be approved, sufficient time is required to consider the advantages and disadvantages. In the same way that we cannot have powers without responsibilities we cannot allow legislation without a method of upholding and regulating it. If the one were to exist without the other, all we would have is a long list of rights and interests that we have no way to protect or enforce. Therefore, let us wait in eager anticipation for the approval and application of the Property Practitioners Bill and let us hope that it is worth the wait and that great things will come of it.
Article written by Chelse Petersen, Candidate Attorney at Faure & Faure Inc.
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