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‘No FFC no commission’ to be resolved by Supreme Court

MAIN IMAGE: Romy Tarboton, director of Signature Real Estate

When the Estate Agency Affairs Board (EAAB) states an estate agent/agency has done all possible to be compliant but due to problems at the regulator wasn’t timeously issued with a fidelity fund certificate (FFC) – is this agent/agency entitled to claim commission? This has now become a matter for the Supreme Court to resolve.

In December 2018 Cape Town High Court judge Diane Davis ruled that an agent/agency isn’t entitled to claim commission if not in possession of a valid FFC at the time when the commission is earned. She dismissed the application by Signature Real Estate’s that they be entitled to claim commission because their intern agent had done all possible to be compliant and was even issued a backdated FFC by the EAAB stating the regulator had erred in issuing the FFC late. Davis ruled that the backdated FFC was irrelevant as she interpreted section 34 of the Estate Agency Affairs Act (EAAA) to require that the agent already be in possession of a valid FFC when the commission is earned. Agents should rather do all possible to ensure that they are timeously issued with FFC’s by the EAAB said Davis.

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Signature was recently granted leave to appeal by Davis.

At the hearing of the application for leave to appeal, Signature’s attorney brought to the attention of Davis a judgement from a similar case brought before the Gauteng court in September 2016. In the matter of Crous International (Pty) Ltd vs Printing Industries Federation of South Africa an estate agent was also not in possession of a valid FFC at the times when commission was earned because the FFC had not been issued by the EAAB. The reason given was that the estate agent had complied with all the necessary requirements for the certificate to be issued but due to technical problems that the EAAB was experiencing the documents couldn’t be printed and sent to the agent.

In the Crous case the judgement was that the agent had authorisation from the EAAB ‘in substance (though not in form) … to perform acts as an estate agent for payment.”

Davis said she doesn’t agree with the notion that there can be “substantial compliance” with sections 26 and 34A – there has to an official document to display as physical proof to the public that this agent had complied with all the requirements of the Act.

However, Davis said given the conflicting opinions expressed in her judgement and that in the Crous judgement on a “matter which has significant practical implications for the estate agents’ profession”, she considers it desirable that the conflict be resolved by the Supreme Court of Appeal. She therefor granted leave to appeal.

Commented Romy Tarboton, director of Signature Real Estate: “Our decision to appeal the ruling was motivated by the negative impact that the ruling has over all compliant estate agents in South Africa who could prospectively suffer as a result of a tardy Board.  We do not believe that the intention of Section 34(c) of the EAAA was for compliant agents to suffer when the EAAB fails to deliver.

“Whilst Judge Davis believes that the remedy lies against the Board, we respectfully disagree. As of 1 January 2019 there were allegedly over 8 000 estate agents that were without FFC’s despite having timeously applied and paid. The Board simply could not fulfil their mandate. I believe that restraining a compliant agent from trading as a result of the EAAB’s inefficiency is, quite frankly, unconstitutional. We are optimistic that our appeal will succeed at the Supreme Court.”

Property Professional will keep our readers updated on this important matter. If you have any comments of questions, you are welcome to send them to editor@propertyprofessional.co.za.

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