Summary of the Property Practitioners Bill, 2016

Posted on: April 4th, 2017 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

22 responses to “Summary of the Property Practitioners Bill, 2016”

  1. Dear Maryna

    Does an individual estate agent, working for a Principal / Estate Agency which operates a Trust Account, also
    have to open a Trust Account in his own name? Thank you.

    Laurence

    • Dear Laurence
      Yes, that seems to be what the Bill envisages in section 53(1)(a), although 53(8) provides that the Minister may prescribe circumstances under which a property practitioner may be exempted from keeping a trust account.
      Presumably, this will be addressed in the regulations and an exemption created where an individual estate agent, working for a Principal/Estate Agency.

      Perhaps, in any event, will this be addressed after he public commentary has been received.

      I hope this assists.
      Kind regards

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  2. If an agent only sells property and does not collect any trust monies why must he have a trust account.
    There should be 2 groups of agents ones that collect clients moneis and a group that does not collect any money. As you are all aware to have a trust account audited is very expensive, this is the main reason for some qualified agents selling properties without a Fidelity fund certificate, and this should be addressed so that we can bring all the agents into line

    • Dear Harry
      You raise a good question and as mentioned in previous posts, it is something that should be taken up with the legislator in the public commentaries submitted to it! the period for making comments is open until 30 April and comments may be sent to Thulani.Khambule@dhs.gov.za.

      Regarding the trust account, note that the Bill makes provision in sec 53 for exemptions that the Minister may grant and presumably an agent who does not collect any deposit or other monies, could apply for such exemption. No regulations have yet been published, so one cannot yet advise as to when the Minister is likely to grant exemptions.

      I hope this assists.

      Kind Regards
      Maryna
      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  3. Hi there

    Why must a bond originator have a fidelity cert and trust account, we dont get commission from clients and dont sell properties

    Rgds

    • Dear Charles
      That is a good question and I think both matters your raise should be taken up with the legislator in the public commentaries submitted to it!

      Regarding the trust account, the Bill makes provision in sec 53 for exemptions that the Minister may grant and presumably a mortgage originator will be able to apply for such exemption because he or she does not hold client funds.

      In respect of the requirement to be in possession of a Fidelity Fund Certificate (FFC), there is currently no exemption in the draft provisions regarding this requirement. Perhaps it simply was not well thought through; but presumably the legislature has the intention thereby to bind mortgage originators – together with all other property practitioners – to the code of conduct, and make them subject to the sanctions, thereby improving the general standard of service delivery in this area of our economy. Remeber, the Bill provides that a FFC can be withdrawn if, amongst other things, a practitioner trangresses the provisions of the new law (including the ethical code). That person is then practically prohibited from practising as such.

      I hope this assists.
      Kind regards
      Maryna
      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

    • Dear Edna
      There will be a new Board, the” Board of the Authority” to be established if and when the Bill becomes law. The Estate Agency Affairs Board (EAAB) will cease to exist.

      I trust this addresses your enquiry.

      Kind Regards
      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  4. The term ‘property practitioner’ is defined to include estate agents, rental agents, mortgage originators, property inspectors, valuators (in certain instances), PROPERTY INSPECTORS and more. The definition is as follows:

    How will this Act affect property inspectors who essentially work on behalf of the private buyer or seller (etc.) These inspectors offer a service which is completed before a property sale takes place and which, essentially, has nothing to do with the selling process.

    Thank you

    • Dear Lestie
      The definition is wide. Once the service is provided, ie “assessing 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 and let a property”, for the acquisition of gain, the person is a property practitioner and must comply with all the provisions of the Act.
      The Bill does not draw a distinction with reference to whom the service is provided for or who requests it. Rather, it stipulates that if you hold yourself out as someone who performs those services, you are considered to be a “property practitioner” as defined, and must then comply with the Act.

      I hope this assists.
      Regards
      Maryna
      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  5. Definitions 1/a/(vi): Could this mean that portals such as P24 and other advertising outlets (facilitators) require an FFC?
    These are arguments for these portals to be regulated as they provide credibility and ‘cover’ for illlegals

    • Dear Jim
      You make a valid point and I think the definition is vague/so wide as to make such an argument possible. (For readers of this blog post, the definition of ‘property practitioner’ includes “any person or business undertaking who or which for the acquisition of gain ….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- … 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 …”)
      A valid point to raise with the legislature in feedback, so that there is clarity whether the intention is to include those portals or not.

      Kind regards

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  6. I am chairman&a treasurer of two body corporates, both sectional title schemes, situated side by side with a common entry / exit gate. They each have 20 units, and I am an owner of a unit in one of the complexes. I receive an accounting fee of R700 / month from each complex for acting as Treasurer ( writing up books, paying accounts & managing the bank accounts, compiling & presenting monthly financial reports, dealing with statutory matters, dealing with required correspondence & dealining with auditors at year end. As executive chairman I run both complexes, dealing with residents & staff, without compensation. The reason I am involved is because I live on the property & like to see it run properly. I now hear that I can no longer perform either of the two functions because I am not a registered property practitioner, that if I do register I will be liable to pay a fee to the governing authority. is this correct? Are both complexes now forced to employ a Managing Agent?

    • Dear Peter
      A great query and I enjoyed looking into this. There are a few considerations, which I list below, to come to the answer that I am of the opinion that you will not be required to register, with the wording as contained in the draft legislation at present. This is because:
      1. The definition of property practitioner includes someone “who for remuneration manages a property on behalf of another”. This is however not what you are doing. You are providing the service of treasurer and receiving remuneration for that, not for your position as chairman. You are not managing the property/sectional title scheme in doing so.
      2. Remember too that sectional title legislation makes provision for the appointment of managing agents, but not to the exclusion of owner involvement. Where practicable, the legislation wants as much owner involvement as possible and where a scheme can manage without appointing an executive managing agent, the legislature supports this fully.
      3. A further consideration is that the Bill is still in draft format. Many changes is likely still to be made before a further draft is released for public comment and before it will become operational. So perhaps I should suggest “watch this spot” so that you stay informed of further drafts of this legislation and the possible implications.

      I hope this addresses your query.
      Kind Regards

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  7. I manage 2 properties for friends who have moved overseas. The total monthly commission is below R1500. Is there anyway that the tenants and owners can ‘exempt’ me as a property practitioner?

    • Dear Pauline
      Thank you for the query.
      The Bill does make provision for persons to apply for exemption. The Bill states that when an application is received, the Authority (ie the new body replacing the EAAB) must take into account whether granting an exemption is “likely to impact negatively on the interests of the general public”; whether it “is likely to impact negatively on competition in the property sector or the property practitioners’ industry”; whether it will “benefit one section of the property practitioners’ industry to the detriment of another”; whether “appropriate, sufficient and effective regulatory protection of consumer’s rights and interests exists” and “whether the exemption would defeat the purposes of the Act”.
      There are quite a few considerations and one cannot guarantee that an exemption will be granted. But if you can show that consumers’ rights are not detrimentally affected with your non-registration, then an exemption is likely.
      Remember, at present this is still draft legislation, so a lot may still change before it becomes law.

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  8. Managing Agents are for fidelity Insurance now included in the body Corporate insurance as regulated by the new C S O S and S T S M A. It is in terms of these acts it is also not required for a Managing Agent to have a Trust account for Body Corporate funds as long as the Body Corporate funds is held in an interest bearing account. Why should Managing agents thus who are not selling or letting still need to be members of the new Board? Such Managing Agents should surely qualify for exemption?
    Thanks for attention.

    • Dear Reinier
      The Bill has a provision which provides that practitioners can apply for exemption from any of the provisions in the Bill.
      You make a valid point and this is a scenario where one would imagine that the Minister will exercise his/her discretion to exempt managing agents from the requirement to have separate fidelity fund cover.
      Kind Regards

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

  9. Dear Maryna

    How will the act impact on Home Inspectors. What will the requirments be and will they also fall under this act.

    Thank you

    • Dear Tertius
      Yes, the Bill appears ton include property inspectors as it provides in the definition of property practitioner someone who “assesses the property to determine the defects, value for money and fit for use as part of the conclusion of an agreement”.
      Whether an intended consequence or not, this inclusion means that the inspector must register with the Authority, obtain a fidelity fund certificate, open a trust account, and the like. (Yes, the Bill does provide for possible exemptions from certain provisions; but an applicant must apply in person – ie it does not appear that industry wide exemptions are foreseen at this stage – and provide grounds why he/she should be exempted from complying with one or other of the provisions.)
      Hopefully property inspectors have come together generally to prepare submissions to government on their blanket inclusion in this legislation. It is definitely necessary for a distinction to be created in the legislation to distinguish between the different roles that agents, inspectors, mortgage originators, managing agents, and so on, play in the property sector. At present, one of the flaws of the draft legislation lies exactly therein that all the roleplayers were thrown into one pot and are treated the same. It is not well thought through or feasible.
      Kind Regards

      Disclaimer: STBB | Smith Tabata Buchanan Boyes accepts no responsibility for errors or omissions in any response on this blog. Responses are provided without prejudice on the information provided and do not constitute legal advice. Please consult an attorney should you require legal assistance

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