The much-anticipated Property Practitioners Act 22 of 2019 (“the Act”) came into effect on 1 February 2022. Its primary objectives are to transform the property sector and provide for the promotion and protection of the interests of consumers.
A summary of the most prevalent changes which need to be borne in mind by all Property Practitioners (as defined in Section 1 of the Act) is outlined below. However, it must be noted that the below is a summary and all Property Practitioners should ensure that they are fully acquainted with all obligations imposed on them by the Act. Property Practitioners are widely defined to include a person who directly or indirectly sells or leases property. This covers sales by rental agents, auctioneers, business brokers, managing agents and trusts. Essentially, the Act applies to any person who facilitates transactions relating to property sales and leases property on behalf of another person, which is a significant broadening of the definition under the old Act – the Estates Agency Affairs Act 112 of 1976. The definition excludes: persons acting out of the ordinary course of their business, where the property is advertised by a person in their personal capacity, attorneys and sheriffs.
Fidelity Fund Certificate (Section 56 and Section 53)
In terms of the Act, all Property Practitioners are required to hold a valid Fidelity Fund Certificate (“FFC”), which must be renewed every three years. If a Property Practitioner is a juristic entity, each member, director, or trustee must hold their own FFC. Any conveyancer dealing with a transaction involving a Property Practitioner, has an obligation to request a copy of the FFC prior to making payment to a Property Practitioner involved in a transaction.
If at the time of the transaction, the Property Practitioner does not have a valid FFC, the Property Practitioner will not be entitled to remuneration stemming from the transaction. If the Property Practitioner has already received remuneration in contravention of the Act, the Property Practitioner will be obliged to immediately repay any amount received during the period of the contravention to the Fund and any seller, purchaser, lessor or lessee may submit a claim (within 3 years) to the Fund with sufficient proof for repayment of an equitable portion of the funds.
The Act further prescribes that the FFC must be displayed for inspection, and it is mandatory that “Registered with the Property Practitioners Regulatory Authority” (“PPRA”) appears on every letter head. Further, all agreements signed where a Property Practitioner is involved with a property transaction must contain “[Name of Property Practitioner] hereby warrants the validity of its FFC as at date of signature of this agreement”.
Notably, the issuing of FFCs is a process itself and applicants must satisfy the requisite criteria in order to be issued with one. Applicants may be refused an FFC if, inter alia, they do not have a valid BEE certificate or tax clearance certificate. The list of requirements can be found at Section 50 of the Act.
Mandatory Disclosure Form (Section 67)
The Act places an obligation on all Property Practitioners to ensure that: the seller/lessor provides a fully completed and signed mandatory disclosure form, that this form be provided to the purchaser/lessee for inspection and signature prior to the sale or lease being finalised, and that the form be annexed to the agreement. This disclosure, once only a practice among practitioners, is now law and must be included with any sale or lease.
The purpose of the mandatory disclosure form is to make the purchaser or lessee aware of all known defects before completing the sale or lease. If the form is not annexed, it is presumed that no deficiencies or defects were disclosed to the consumer.
It is unclear what the position would be if the circumstances make it impossible to provide for a full disclosure (i.e., in a sale from an estate). As it stands, there remains an obligation in all instances, and a failure to comply with this obligation may result in the Property Practitioner being held liable to the consumer. In instances where this impossible, it is suggested that the form be annexed and signed with a recordal outlining the relevant circumstances.
Property Practitioner Relations (Section 58) and Regulated Practices (Section 63)
The Act places a limitation on the relationships that Property Practitioners have with other property market service providers, including attorneys and conveyancers.
A Property Practitioner may not “enter into any arrangement, formally or informally, whereby a consumer is obliged or encouraged to use a particular service, including an attorney, to render any service or ancillary service in respect of any transactions which that Property Practitioner was the effective cause.”
A contravention of this section could result in the remuneration earned as a result of the transaction having to be repaid to the consumer together with all interest accumulated from the date of payment to the date of repayment.
Further, any person convicted of an offence in terms of the Act is liable to a fine or imprisonment for a period not exceeding 10 years.
The Act provides for further regulations governing the business practices of Property Practitioners, with regulations providing a list of actions considered undesirable business practices which Practitioners should not engage in. Practitioners should familiarise themselves with these practices as they are considered sanctionable offences. The latest regulations listing these practices can be found at https://www.gov.za/sites/default/files/gcis_document/202201/45735pr47.pdf
To address transformation in the property sector, the Act established the Property Practitioners Regulatory Authority (“PPRA”) which from time to time will assess and implement measures to promote an inclusive and integrated property sector. The PPRA is also required to open a fund within 6 months of being established, with the purpose being to promote black owned principals and firms and encourage participation from previously disadvantaged groups within the property sector.
In terms of Section 20, organs of state are obliged, when procuring property related goods, to make use of Property Practitioners who comply with BBBEE.
Regulation 41 in Schedule 5 of the Regulations provides some transitional arrangements to phase in compliance of the Act.
These provisions include the following:
- A practitioner who failed to register as an “estate agent” under the previous Act or who failed to obtain a FFC has a grace period of six months from 1 February 2022 to register with the Authority, and 12 months thereafter to obtain an FFC.
- The Authority is entitled to consult with professional bodies of various industries to enable progressive compliance with the Act.
- Practitioners who already hold FFCs on the date of promulgation of the Act may still use that FFC until it expires in its normal course.
- If a person became qualified under the old Act within 12 months before promulgation of the new Act (1 February 2022) to be registered as an estate agent, then the Authority is obliged to recognise such qualifications for the purposes of the Act.
The Property Practitioners Act imposes several new restrictions on professionals who deal with property on behalf of others. Practitioners should take note of the applicable requirements imposed on them by the Act, as well as the timeline for compliance therewith. In particular, practitioners should ensure that: they follow the new provisions regarding mandatory disclosure forms, their Fidelity Fund Certificates are up to date and that they display their Certificate/Certification in the appropriate manner. A full copy of the Act can be found at https://www.gov.za/sites/default/files/gcis_document/201910/42746gon1295.pdf.