EAAB didn’t renew PI cover for estate agents

EAAB didn’t renew PI cover for estate agents

MAIN IMAGE: Tony Clarke, new Rebosa chairman; Mamodupi Mohlala, CEO EAAB

It was recently confirmed that the professional indemnity cover, that the Estate Agency Affairs Board (EAAB) arranged for all estate agents in 2017, lapsed about a year ago and wasn’t renewed without the regulator informing the industry of this yet.

The sale of a home or even concluding a rental agreement has become a highly regulated business. Estate agents these days must be careful to ensure everything they do (direct marketing, managing client data, client interaction, property transactions etc) meet with all the relevant current legal requirements. This is a tall order even for the most diligent of estate agents as new laws with direct impact on the property sector such as the POPI Act are passed almost on a yearly basis.

Working in such a highly regulated environment poses the very real risk that an estate agents or any other property practitioners could intentionally or unintentionally wrong a consumer through unprofessional conduct or negligence. The primary function of the EAAB is regulate the real estate industry in such a manner as to protect consumers.

The EAAB’s PI cover policy

Consequently in 2017 the EAAB saw the need to provide some form of protection to property professionals “against wrong advice or unprofessional services that they may have provided to consumers in the course and scope of rendering estate agency services” (quote from the EAAB’s notice issued in 2017). The regulator thus arranged for professional indemnity cover for all registered estate agents through Aon South Africa limited to claims arising from negligence or delict (claims for fraud or criminal acts were excluded). The intention of the policy was to provide protection for the consumer and the estate agent.

In August 2017 the EAAB officially informed the real estate industry that such a policy was now in place. Since then there has been no communication about possibly discontinuing the policy which left the industry firmly under the impression that the professional indemnity cover was still there. This is not the case.

Industry body Rebosa recently confirmed with Aon that the indemnity cover policy lapsed in June 2019 and was not renewed since. This had Rebosa concerned that a situation now existed where thousands of estate agents were unwittingly without a proper PI cover. Rebosa chairman Tony Clarke says he knows of principals that cancelled their own PI policies in 2017 when they were informed of the EAAB’s cover and the current situation is placing the public at risk should an agent act in a negligent manner. “I feel that it was irresponsible for the board to allow this policy to lapse without informing industry (with sufficient notice) so that industry could organise it’s own cover. I further feel the EAAB should seriously consider reinstating such policy as it will protect the fund,” he says.

There are some estate agencies that have their own professional indemnity cover for their agents, but others were blissfully unaware that they could not rely any longer on the PI cover arranged by the EAAB. The Seeff Property Group is one of them. Their national compliance officer, Mark Jaftha, says they now have to look to their own insurers in terms of addressing the risk and finding a solution for PI top-up cover for their agents. “This is an important insurance to protect consumers,” he says. The PI cover from the EAAB was up to R 1 million.

When asked for comment on the matter, the EAAB’s CEO Mamodupi Mohlala acknowledged that the EAAB had, as she put it, “in the past exercised its discretion by arranging indemnity insurance to cover estate agents’ liability to members of the public on the ground of malpractice”. However in light of the newly promulgated Property Practitioners Act, which she says gives the Minister discretion to prescribe indemnity insurance which a property practitioner must take out and maintain, the EAAB “sought [sic] it necessary that estate agents take out indemnity insurance of their choice and approach any professional broker of their choice to ensure adequate protection for their risk exposure”. She said a formal communication will be send to all estate agents to notify them that the EAAB resolved not to renew the indemnity insurance, but didn’t offer any indication as to when this will happen.

“Ms Mohlala does not only not explain why nor apologise for not having advised the industry of this decision and choosing to leave agents under the impression that the cover does exist. The cancellation decision in June last year was taken under the auspices of the current Act which is still in place today and Section 40 of the new Property Practitioners Act gives the new Authority the same power to arrange this insurance. It is hard to understand why Ms Mohlala approves of a decision to cancel the insurance when it could have been and still can be arranged for around R 250,000 pa, payable from a R600 million Fidelity Fund, and ensure the protection of consumers and agents alike,” says Jan le Roux, CE of Rebosa.

Why is PI cover important?

According to Clarissa Rizzo, manager: Professional Risks unit at Aon South Africa, many estate agents are skeptical about the merit of having professional indemnity cover, assuming that only careless professionals have to worry about a claim being lodged against them. “This is not always the case, and even if an agent has acted in full accordance with the law and professional standards, if a claim is lodged against them they will need to defend their position and actions in a legal process, the defense costs of which can be onerous.

“Considering that a day in a high court could be in excess of R150k per day and that claims are typically long tailed by nature, taking years and huge legal costs before being finalised, the need for PI insurance to protect your reputation and ability to work as a professional is crucial,” explains Rizzo.

Property professionals operate today in an environment of ever-increasing requirements for better transparency, disclosure, accountability and governance. Professional indemnity (PI) cover in the real-estate world is similar to medical malpractice cover for doctors. While the sale or rental management of a client’s home may not require the precision of a surgeon, even a simple property deal or rental management can potentially be fraught with pitfalls that can land even the most diligent real estate professional in a legal and financial conundrum.

The following PI claims examples illustrate the need for PI cover for estate agents:

  • The owner of a property brought a claim against the real estate agency for damages caused by the building contractor that had attended to repairs to the property.
  • In another matter, the owner claimed that due to the negligence of the agent, the owner lost out on a prospective tenant.
  • An owner made a claim where the agent was supposed to collect the rental and failed to do so.
  • Another claim alleges that the agent failed to conduct proper inspections when the tenant vacated.

A practitioner without PI protection would be liable for these costs, facing financial and reputational ruin.

Showing 19 comments
  • Hans Snyman

    What are we paying for at the EAAB?

  • Francis Samson

    This is very scary, and we have not been made aware of this.
    What are we paying the EAAB for???

  • Colleen

    Who knows what we are paying for? I think that EAAB stands for Easy, Access to Agents Budget!!!

  • Paul Webel

    Has the CEO indicated that she will reconsider her decision or do we need to all rush out and get PI cover? Is Rebosa going to challenge her decision and can anyone shed light on what the next steps are likely to be?

  • Mark Holder

    The EAAB is a money-making rip-off scam and should be disbanded. We should be allowed to self-regulate.

  • Johan Scott

    Unbelievable! To cancel the PI and not even advise us of her intention to do so! Then to keep mum for more than a year about it.


    The EAAB does not care a damn for any estate agent. It is a money making racket. The CPD structure has no structure and they are sitting with our money and we still have not received any assignments or details for this year. Take all the money received for this and the interest will be tremendous for they will benefit.
    I accidentally sent a amount of R7 200 to them by EFT and I have been trying since April to get my money back. They are now saying they cannot work because of Covid.

  • Robert Kermack

    I agree with all the comments made. I find the EAAB the most ineffective and hopeless organisation to deal with. The online query portal constantly does not work either.

  • Ian Badenhorst

    I am arranging my own cover for public liability and professional indemnity at a premium of just over R5000 for a 12 month period.

    I shall not be renewing the EAAB membership which was to have provided such cover which was part of membership fees paid last year, and now again for the new year going forward.

    I trust that REBOSA will act on behalf of the industry and secure the interests of estate agents which is to replace the EAAB who cannot meet its own obligations and required regulating of the industry in protection of consumers.

    Win the consumers and EAAB will find it difficult to gain confidence of its own purpose.

    • les

      Hi Ian

      Which company is doing you PI – that is a good rate they give you


  • Robert Kermack

    I fully agree with the above comments. The industry does not need an ineffective organisation like the EAAB. We can do way better without all the red tape and money-making matters like CPD.

  • joan chernotsky

    I agree. the EAAB is useless and toothless. all they know is to take the money for Fidelity Certificates, CPD, etc. and never resolve queries but rather accuse you of not paying for things you already have. The accounts department queries has one poor person serving at the counter and it is nothing to spend two hours waiting your turn, only to find one person has moved in all that time.

    Rebosa, it is time for a shake up

  • Nimmi Kowlaser

    The EAAB is like the SABC , we have to pay for a licence but derive absolutely no benefit from them. What are our fees used for? They are not held accountable for anything. Is there any way to force them to actually take some action?

  • Keith

    Is there no way that the industry can all stand together and institute a class action for gross negligence and maladministration against the EAAB and then also against Mamodupi Mohlala? Then also institute an action to remove the EAAB as the governing body for the industry and then let the industry itself form their own regulatory body comprising of representatives from the various independents like Rebosa and IEASA? Right now we are all being ripped off so that others can live a lavish lifestyle on fat cat salaries with benefits etc. What has the EAAB done to try and assist and seek govt. relief for the industry during lockdown? I stand corrected but if memory serves me well real estate is the fourth biggest contributor to GDP. The Govt gets their slice on all deals be they VAT or transfer duties. Then we still get taxed on our income but when the paw paw hits the fan we get the middle finger. First things first, let the industry self regulate. Maybe they are too scared that they will be shown up when the industry runs the way it should.

    • Machteld

      Hi Keith, I agree. Why does the industry allow this level of abuse? I also think we should institute a class action suit against this totally incompetent regulator. At what point of gross fidiciary and material negligence and incompetence does a “regulator” lose it’s legitimacy as a “regulator”? The EAAB is the single biggest disincentive to becoming a licensed estate agent in South Africa. They are an obstruction to job creation etc, you know the rest. Their weak CPD offering extracts tens of millions from the profession and is about 300% more expensive than the other discipline I am registered in which is run efficiently by the private sector where your points are never lost and websites work. Currently I have paid my CPD and am getting nothing less than malevolent obstruction from the organization. I am not able to access CPD. They can’t find my R2500 bla bla bla, every year, the same.

  • Sally Kruger

    I thought it was only me struggling to register a new company (on the advice of “fixing” a “mistake” at EAAB) since 23 April 2019.
    Same answer since June 2019 up to this week …. . “It is registered, I will give instruction to the “back office (registration) to send the FFC”
    Needless to say that we are still without!

  • Liz Crutchley

    I agree with all previous comments. CPD is a rip off. I paid for 2020 only to be told after due date for payment of 28 Feb of a moratorium. A little too late. Goodbye R2500. Abolish the useless EAAB NOW

    • les

      The EAAB gets R2500 from every EA for their CPD program – the videos and the questions sometimes dont make sense!
      This bring them in over R80 million – what are they going to do with all this money?
      They could be paying for PPE from the R80 million.
      Did you know that they had a qualified Audit last year!!!!
      They have a cheek sending auditors to our businesses to see if we are running our businesses correctly and yet they cannot do the same!

      Australia did away with their EAAB so we should do so too!

  • Charles Uren

    I feel that what the EAAB has done, needs to be investigated and people should be held accountable . Firstly I want to know what happened to the funds that we paid all the years to cover us . The yearly fee included the insurance cover . Why should we pay more if there is no cover . Proper CPD courses should be done .

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