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The new Property Practitioners Act: Key regulations as effect date expected

The regulations for the new Property Practitioners act are being finalised, after commentary was extended until 20 November. Here are some of the key aspects to note. Property24 19 November 2020

While the Property Practitioner Act is in fact law, it is not yet operational.

On 3 October 2019, President Ramaphosa promulgated the new Property Practitioners Act 22 of 2019. The Act only comes into operation on a date fixed by the President by proclamation in the Gazette. The effective date is soon to be announced as the Estate Agents Affairs Board is currently facilitating information sessions by the Department of Human Settlements.

The comment period for the Draft Property Practitioners Regulations has been extended by the human settlements department until 20 November 2020. The draft regulations were published for comment in Government Gazette 43073 in March 2020. The draft regulations flow from the Property Practitioners Act, signed by the president last year.

In short, the new Property Practitioners Act seeks to:

  • provide for the regulation of property practitioners;

  • provide for the continuation of the Estate Agency Affairs Board as the Property Practitioners Regulatory Authority;

  • provide for the appointment of the members of the Board and matters incidental thereto;

  • provide for the appointment of the Chief Executive Officer and other staff members of the Authority;

  • provide for transformation of the property practitioners sector

  • provide for the establishment of the transformation fund and establishment of the research centre on transformation;

  • provide for compliance with and enforcement of the provisions of the Act;

  • provide for the continuation of the Estate Agents Fidelity Fund as the Property Practitioners Fidelity Fund;

  • provide for consumer protection;

  • provide for the repeal of the Estate Agency Affairs Act, 1976; and

  • provide for matters connected therewith.

The Act itself is far more onerous than its predecessor the Estate Agency Affairs Act, and the regulations will put a number of changes into effect.

The new act and interns

The Act introduces the terms “Property Practitioner, Candidate Property Practitioner and Principal Property Practitioner” which becomes far more encompassing than the old term “Estate Agent”.

Jaco Rademeyer, from Jaco Rademeyer Estates says, "The definition itself is extensive where it includes not only those who are involved in the selling of immovable property but also those involved in the financing of it such as bond brokers, providers of bridging finance and other finance providers except those institutions that fall under “financial institutions” in terms of the Financial Services Board Act. The term also includes auctioneers, developers, property managers, franchisees and the list goes on.

Needless to say, it is far broader than the term “Estate Agent”.

One of the most prominent changes affects intern estate agents, says Salma le Roux, Owner of iSiKolo school of learning –a SETA accredited training provider for Real Estate qualifications.

Interns will be referred to as candidate property practitioners. 'Candidate property practitioner’' means a person who has not yet met all the qualification or experience required as prescribed, to practice as a property practitioner and who is undergoing training under the supervision of a property practitioner, or a program created by the Authority;

The extract of the Act: Supervision of candidate property practitioners 64 - states a CPP may not draft or complete a document or clause in a document that relates to a mandate, service level agreement, sales agreement, lease agreement.

"If the CPP performs such an action and if the principal allows such action, there will be no entitlement to payment/remuneration for creating the transaction. Based on the requirements of the PPA, The principal cannot use the defence that he was not aware of these actions, "says Le Roux.

"If the principal has more than one office and cannot be everywhere, which we know is a real problem, he/she must make provision for mentors/full status property practitioners to be available to assist the candidates in the drafting or completion of the abovementioned documents.

Therefore, he advises that it is in the interest of the principal and the candidate property practitioner [CPP] that:

  • The CPP immediately applies for their 1st FFC on signature of contract with property company;

  • The CPP completes their logbook in the 13th month after date of issue of 1st FFC;

  • Starts with their NQF4 qualification – not wait for their 2nd year and then opt for the fast track option of RPL, but rather receive full training and hence empowering themselves with education and knowledge that can be put into practice.

  • Writes the PDE4 as soon as their qualification has been verified and their logbook accepted.

"Technically speaking an intern can become full status within their 14th-18th month of being part of the industry. It is not in the interest of the company or the CPP to be employed as a career intern. There will always be a risk factor" warns Le Roux.

"This will mean you will always have to have a mentor/ full status agent/principal with the CPP when they draft or complete documents pertaining to mandates, sales, leases, service level agreements."

Valid Fidelity Fund Certificate

Anyone who falls under the definition of a Property Practitioner must obtain a valid Fidelity Fund Certificate (FCC) which must include a tax clearance certificate and the required BEE certification being levels 1 – 8 or the exemption documentation thereof.

"Importantly, this obligation is imposed on all Property Practitioners including each and every Property Practitioner within a larger Agency. In the absence of the FCC, the Property Practitioner may not charge commission or in the event of already receiving such, it must thereafter be refunded," says Rademeyer.

Transfers and suspensive conditions

The Act brings some onerous changes to the right to claim commission by the Property Practitioner, warns Rademeyer.

A Property Practitioner is not entitled to any remuneration or other payment in respect of or arising from the performance of any property purchase transaction prior to the transfer of the property and registration in the name of the purchaser. This provision undoubtedly places the Practitioner in an unsecure position in the event that the Agreement is cancelled and all work done thus far would be futile. However, the Regulations of the Act brought a sigh of relief.

"The wording of the Regulation suggests that a Property Practitioner is entitled to commission upon fulfilment of the relevant suspensive condition(s). That way if the parties cancel after fulfilment of the condition, the Practitioner still has the contractual right to commission when commission was earned prior to registration," he says.

New Property Practitioners Regulatory Authority

The Estate Agency Affairs Board (EAAB) will be replaced by the Property Practitioners Regulatory Authority. The difference between the two would be that the Authority would have far more reaching powers in regulating all Property Practitioners, "which would include inspections without notice and more serious consequences for non-compliance".

Declaration forms to be mandatory

Lastly, in terms of the Property Practitioners Act, declaration forms will now be mandatory and must form part of the Agreement of Sale.

"All Practitioners must consult with all sellers or landlords in this regard and cannot accept a mandate without the disclosure form. All purchasers and tenants must be provided with the form, failing which it is automatically assumed that no defects were disclosed to the purchaser or tenant.

"In light of the above, the Property Practitioners Act is undoubtedly going to bring numerous changes to the procedures and norms known today in the property market. Despite not being enforceable at this stage, all relevant role-players should commence adapting their ways to be harmonious with the Act so that the transition into the new era is less burdensome," says Rademeyer.

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