There is a flood of legislation in the pipeline for 2015, including bills that could affect every aspect of the property industry. Companies that are cognisant of this legislation and its implications will be able to better navigate the waters ahead of its implementation.
The most important legislation on the table for 2015 are the Property Practitioners and Regulation of Land Holdings bills, as well as section 9 of the Broad-Based Black Economic Empowerment Act No. 53 of 2003.
Property Practitioners Bill
Let’s begin by examining the Property Practitioners Bill, which is intended to replace the EAA Act No. 112 of 1976. According to Andrew Golding, chief executive of the Pam Golding Property Group, “the pending revision of the existing Estate Agency Affairs Act into the new Property Practitioners Bill will be extremely important in that it will govern the residential property industry for the immediate future once it’s promulgated.”
An extract from a presentation to the Institute of Estate Agents North by the Estate Agency Affairs Board on 21 February 2014 revealed that the proposed bill would deal with:
• legislating the transformation of the sector
• enhancing job creation
• enforcing tax compliance
• giving disciplinary hearing rulings the status of a judgment in a civil court and executing it accordingly
• giving the EAAB the capacity to deliver on its mandate
• making the rulings of the DC the equivalent of the ruling of a magistrate’s court
• enhancing the existing regulatory mechanism
• increasing the powers of inspectors
• eliminating unlawful market practices
• buying access to business opportunities
• limiting the rights of consumers.
There is no doubt that the EAA Act No. 112 of 1976 is in need of updating and there is hope that the Property Practitioners Bill will have a positive effect on the property industry, but many voices in the property industry have expressed concern about the coming bill and what it could mean for the property sector.
Said Seeff chairman Samuel Seeff: “While ripe for an overhaul – and there is a need for new legislation to regulate the operational aspects of the industry – it still needs to be discussed and debated. For example, there is some indication that the new bill proposes to include an element of transformation. While this is a high priority, it is something that most real estate practitioners would agree would be out of place and should rather be dealt with within property transformation legislation.
“Amid new legislation in the industry, we would hope that the new bill would look to simplify rather than complicate. Rather, the Property Practitioners Bill should deal with the operational aspects of real estate agencies and raising the overall standards of the professional by regulating aspects such as registration and certification, how the business should be run and looked after and legal aspects pertaining to the business.
“It needs to deal with the actual ability to register, the legal requirements around that, certification and, of course, the vital matter of issuing certificates and, of course, audits. Aspects such as the certification of practitioners, regulating ongoing activities, including trust accounts, Fidelity Fund Certificates and protecting the consumer, insofar as the CPA legislation is concerned, should be covered by the bill/act.”
What the actual bill will deal with remains to be seen, but the best way to ensure that your property company is ahead of the curve is to know what the legislation entails and to make sure that your voice is heard, should the proposed bill be made available for comment by property professionals.
Regulation of Land Holdings Bill
The next bill to explore is the Regulation of Land Holdings Bill. This is the bill that will govern foreign land ownership, a somewhat controversial issue that hasn’t been resolved. In a speech presented on 15 August last year, Gugile Nkwinti, the minister of rural development and land reform, said:
“This bill seeks to provide for the establishment and composition of a land commission, the appointment, qualifications and remuneration of members of the land commission, the classification of controlled land, the determination of land ceilings and the regulation of land ownership by foreign nationals. Through this bill we seek to provide a legal framework for the disclosure of race, gender and nationality by owners of land and property (both natural and juristic). It will provide a transparent and more conducive regulatory environment for the generation and utilisation of policy-relevant information on land ownership and usage.”
While this bill has not yet been put into effect, the implications for the property industry are worrying, to say the least. According to Times Live, last year foreigners accounted for R6.2-billion worth of property purchased in South Africa. In the same article, Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said:
“There were 1 497 sales, worth R2.3-billion, to foreigners in Cape Town, and 2 565 sales, worth R2.8-billion, to foreign buyers in Johannesburg. What was even more encouraging was that foreign buyers were looking at areas beyond these two cities. For example, foreign buyers purchased about 670 properties, worth about R800-million, in KwaZulu-Natal in 2013 and about 260 properties, worth about R230- million, in the Eastern Cape. In addition, we are seeing a growing trend among foreign buyers to purchase properties in South Africa as investments rather than for their own use, and that is a healthy vote of confidence in our real estate market.”
A bill that proposed to limit foreign land ownership could undermine confidence in the South African property market and that could lead to very negative implications in 2015. Said Seeff: “We have been ‘vocal’ since the question of the government’s move to restrict foreign land ownership in early 2013, calling for greater clarity on whether it would apply to state-owned land, privately owned land or both. It is also not clear whether this extends to agricultural land only or also to residential ownership. While we agree with the philosophy of wanting to restrict the sale of government-owned land, we would question the value of restricting private land ownership by foreign nationals.
“Foreign property ownership accounts for at best 2% to 3% of all property ownership and is rather insignificant in terms of the amount of property owned when weighing this against the financial and job creation benefits that this brings. Vitally, the 2% to 3% ownership alluded to above is further reduced when taking into account that many foreigners also sell their property here annually and the net effect is thus further negated. It is a misconception that foreigners own the most expensive or best-located properties in the country.”
Even with regard to the luxury property market – properties priced above the R20-million mark – the percentage remains about 2% to 3% at best. In fact, the highest prices ever achieved for residential property sold in the country were to South Africans: the One&Only Cape Town penthouse that sold for R110-million to a South African buyer, for example.
The property sector makes a valuable contribution to the GDP, and aside from attracting foreign investment, foreign-owned property generates residual income in the form of rates and taxes and other basic utility costs. Foreign property investors have also contributed to vital infrastructure development. Rather than “stealing” the country’s crown jewel, they have polished them. “Consider for example those that invested in old, run-down wine farms,” said Seeff. “They injected vital funds into infrastructure development and contributed to the regeneration of these as working farms, retaining the heritage and job creation. Most of these owners employ sound labour practices and provide housing and basic services and above-average wages. Yet another example is the inner-city regeneration of Cape Town that was largely led by Irish investors. This brought about cash flows into the country, infrastructure development and job creation.
“There is also a knock-on effect when foreigners renovate their homes: they create work for architects, builders, artisans, decorators and so on. There is enough intervention in the market from government and we do not believe that an additional layer needs to be added for very little upside.” It is in regard to bills like these, which may harm not only the image of the property industry but also to the businesses and professionals within that industry, that the property industry needs to work together and make sure they are not passed.
Property Sector Charter
The last bill that could have a negative effect on the property industry in 2015 is the sector code on black economic empowerment in the Property Sector Charter, which states: “10.4.1: 50% Black practitioners as a percentage of total practitioners using the adjusted recognition for gender.”
Points 11.1 and 11.2 elaborate: “11.1 Enterprises in the sector are not adequately investing in skills development and consequently there are limited levels of workplace development and continued professional training. There is also an insufficient number of structured and accredited training programmes or curricula in property-related professions.
“11.2 The parties to the charter commit from gazetting of the sector code to address the backlog in structured skills development. This programme will be designed in partnership with the sector, the SETA, the Estate Agency Affairs Board (‘the EAAB’) and any other sector regulatory body, academic institutions and government.”
There has been much debate on the need for transformation in the property sector and many industry leaders have already initiated transformation in their own companies. The consensus is that there is a need for government support in transforming the sector. There is no funding or programmes available to pave the way for the transformation called for in the Property Sector Charter and many professionals feel that to enforce transformation without adequate programmes and support would be to the detriment of the industry and individuals joining the property industry.
Said Seeff: “While we believe transformation is a matter of priority for the industry, we are concerned that this bill is attempting a quick fix with no long-term sustainability in mind. One of the most immediate difficulties that we foresee with the proposal to bring black owners into the business is that it poses the question as to who would buy a 50% stake in a real estate business of which they cannot be a director? Being a director of a real estate agency requires of the individual to be at a principal level with an NQF4-level qualification and at least three years real estate experience. This is not to say that transformation should not take place – quite the contrary – but rather than trying to change the fundamentals we would prefer to see the government look to introduce black candidates into the industry where they can gain the necessary experience and accreditation and then move into an ownership role, thereby creating the platform for sustainable long-term black involvement in the industry.”
The proposed legislation that is on the cards for the property sector this year could have some profound effects on the industry and businesses from the ground up. It’s imperative to know what legislation is being proposed and what it will mean for you and your business before it is implemented.
Words: Angelique Redmond
