Are the PPA draft regulations on par?

Are the PPA draft regulations on par?

MAIN IMAGE: Clem Daniel, director Cliffe Dekker Hofmeyr; Mashilo Pitjeng, SAIBPP board member; Xoliswa Tini, Xoliswa Tini Properties; Brian Sango, marketing manager PropertyInspect

What do the draft regulations under the Property Practitioners Act say about trust accounts, FFC renewals, attorneys that sell property etc? The time to speak up about the possible shortcomings are short.

The way estate agents and other property practitioners work and operate will change irrevocably once the regulations are prescribed under the new Property Practitioners Act. The National Property Practitioners Council (NPPC) will be hosting a virtual town hall on Friday 13 November to discuss the Property Practitioners Regulations which are currently out for public comment.

The Property Practitioners Regulations will give effect to the Act and set out rules and processes that property practitioners will need to adhere to going forward says Vuyiswa Mutshekwane, chairperson of the NPPC. “We therefore believe that the process of developing the regulations must be lead and informed by industry and must be as broad and far-reaching as possible so the event will be free and open to all and will take place online to ensure maximum industry engagement,” she explains. Mutshekwane adds that practitioners will also have the opportunity to submit comments or questions beforehand via email which will form part of the NPPCs final written submission to the regulations.

Confirmed speakers thus far (more may be added by next week) include Clem Daniel, director with law firm Cliffe Dekker Hofmeyr, Mashilo Pitjeng, chairperson of policy and advocacy for the South African Institute of Black Property Practitioners (SAIBPP) and Xoliswa Tini of Xoliswa Tini Properties. Brian Sango, sales manager Property Inspect will act as moderator.

About the webinar

According to Daniel the purpose of the event is for real estate practitioners to have a virtual town hall discussion about the draft regulations in order to understand what is proposed and how this will impact their day-to-day operations. “The Act is a ‘done deal’, but where they wish to, estate agents can still make and submit comments on the draft regulations until 20 November,” he explains.

The webinar will take place on MS Teams because it has the capacity to accommodate up to 20 000 attendees. The platform also allows attendees to post questions online to the panellists. The panellists will have the option to share the question or to respond directly to the person that sent it. To attend, all you have to do is register by clicking on the link below. Once you register you will receive a confirmation email with a link to join the webinar next Friday. You do not need to download MS Teams to participate.

The Property Practitioners Regulations Virtual Town Hall takes place on Friday 13 November from 10:00-11:30. To register for the free event, just click here. You may submit your questions/comments to the panelists beforehand via e-mail to admin@nppc.org.za.

What will be discussed?

Property Professional asked Daniel some questions that are anticipated be to be of concern to estate agents. He responded with comments to the questions, which Property Practitioner expects to be discussed at the webinar.

Must all agents have trust accounts?

Answer: Section 23 (2) permits the Minister of Human Settlements to determine circumstances under which certain property practitioners may be exempted from keeping trust accounts. The draft regulations as published allow for a property practitioner to be exempted from keeping a trust account if the property practitioner has never received any monies into trust or no longer receives money into trust and submits an affidavit in accordance with the requirements of the regulations to the Authority (previously known as the Estate Agency Affairs Board). That affidavit includes (but is not limited to) a statement that the property practitioner will not in the future receive any trust funds without giving the Authority at least 60 days advance notice and providing the Authority with full details of the trust account.

Most agents renew Fidelity Fund certificates every year. Will people dealing through illegal property practitioners enjoy cover from the Fidelity Fund?

Under the new Property Practitioners Act, property practitioners will only be required to renew their Fidelity Fund certificates every third year. The Fidelity Fund will continue to exist under the Property Practitioners Act and in terms of section 35 (a), the fund must reimburse people who suffer pecuniary loss by reason of the theft of trust money by property practitioners. The fund will only cover such theft if the property practitioner in question was in possession of a valid Fidelity Fund certificate at the time of the theft. The regulations prescribe the claims mechanism but also limit claims against the Fidelity Fund to a maximum amount of R2 million in respect of each cause of action.

Will property practitioners (still) have to pay interest on trust accounts to the Authority?

Under the existing Estate Agency Affairs Act, it is expressly provided in section 32 that interest earned on estate agent’s general trust accounts (as opposed to specific investment accounts) must, subject to the terms of any written mandate, be paid to the Fidelity Fund (see section 32 (2) (c)). The Property Practitioners Act contains no express parallel provision. It states that “The following must be paid into the Fund…” and then proceeds to list a number of items, including “interest paid to the Fund” (see section 34 (2) (e)). Section 54 deals with property practitioners trust accounts. Although section 54 refers to the question of interest in various areas (including an obligation on a bank to provide a certificate to the Authority declaring the interest in respect of a trust account), it does not expressly state that interest earned on trust accounts must be paid to the Fidelity Fund. It appears that this was an oversight in the legislation. During August last year we wrote to the principal state law adviser and drew this to his attention. While we received an acknowledgement of receipt from him to our communication, nothing further happened about the matter. Strangely enough the regulations refer to an obligation on a property practitioner to pay the interest on a trust account to “the party entitled to such interest, or the authority, as the case may be, subject to any written agreement in this regard between him and such party”. On the face of it, it would seem that there is no obligation under the Property Practitioners Act on property practitioners to pay the interest earned on the trust accounts over to the Fidelity Fund, as is the case under the Estate Agency Affairs Act. The effect of the provision in the regulations is at best, unclear. The issue requires further consideration, and it is likely that it will be further clarified between now and the time that the Property Practitioners Act becomes effective.

 When agents leave one agency to join another, delays are experienced with the re-issue of certificates. Will this still be the case?

This is more of a practical issue than a legal issue. From a functional perspective, the role of the EAAB and the role of the Authority will be carried out by the same organisation. It is likely therefore that whatever administrative difficulties exist at the time that the industry transitions from the Estate Agency Affairs Act to the Property Practitioners Act, will still be apparent.

Will attorneys still be exempted?

 Under the existing Estate Agency Affairs Act, attorneys are excluded under subparagraph (d) of the definition of “estate agent”. This exclusion has been carried forward into the Property Practitioners Act. However, certain persons employed by attorneys to carry out certain activities normally carried out by property practitioners, will be regarded as property practitioners (see subparagraph (f) of the definition of “property practitioner”). The draft regulations contain certain prohibitions imposed upon attorneys and attorneys’ practices which prevent them from soliciting mandates for the sale of properties or entering into arrangements to provide conveyancing services to any property practitioner business in which such attorney or attorneys firm has a direct or indirect interest (see Regulation 35 (a) under the title “Undesirable Business Practices”).

 What will happen when the Authority does not issue certificates timeously?

 The Property Practitioners Act provides in section 49 for mandatory time periods for the consideration of applications submitted to the Authority and provides that if the Authority fails to comply with the mandatory time periods that the application is deemed to have been approved and that it must issue the applicant with the relevant certificate. There may however be practical difficulties, notwithstanding the foregoing.

 Will developers be required to register as property practitioners?

In the Property Practitioners Act under the definition of “property practitioner” subparagraph (a) (vi) permits the Minister of Human Settlements to specify additional services which are to fall within the definition of “property practitioner”. Under the draft regulations there is now included “the sale, by auction or otherwise, by any person as part of the activities of operating a property development business, any property or any interest, right or title in or to a property or property development” unless those activities are carried out solely through the auspices of somebody who is a registered property practitioner.

Will agents be properly represented on the board of the Authority?

The current Estate Agency Affairs Act obliges the Minister to appoint five members of the estate agents’ industry to the Board of the EAAB (i.e. one third of the total of 15 board members). The Property Practitioners Act does not contain a similar provision but provides that the Board of the Authority will constitute not less than 9 and not more than 12 non-executive members. It does provide that the Board must constitute a combination of skills and competencies, including “sufficient experience as property practitioners”. However, no specific industry representation is provided for.

 Must all property practitioners have BEE and tax certificates?

In principle yes, this is what is provided for under section 50 (a) (vii) and (x). However, exemptions may be applied for and the draft regulations specifically provide that where natural persons apply for exemption from having to have a tax certificate or a BEE certificate that such exemption should ordinarily be granted. Further that such exemptions may be applied for simultaneously with any application for registration as a property practitioner or for a fidelity fund certificate or renewal of the fidelity fund certificate.

What will happen when a conveyancer refuses to pay commission and a property practitioner cannot produce a valid FFC despite all efforts to acquire the same?

Under section 56 (5) a conveyancer is absolutely prohibited from paying remuneration to a property practitioner who does not possess a Fidelity Fund certificate. Further, in terms of section 56 (3) if a property practitioner receives any remuneration while not being in possession of a valid Fidelity Fund certificate, that property practitioner is obliged to pay the remuneration concerned to the Fidelity Fund and the party who paid the remuneration to the property practitioner is entitled to reclaim it from the Fidelity Fund within a period of three years.

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