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Growing unease over Property24’s tenant recruitment service

MAIN IMAGE: JP Farinha, CEO Property24; Tony Clarke, MD Rawson Property Group; Andrew Sadomba, principal Y-Rent Properties; Xoliswa Tini, CEO Xoliswa Tini Property Group

Property24’s rental assistance service has unsettled some of its’ real estate sector customers as it appears to them as if the portal ‘wants to eat from the same plate’.

The rental sector has seen a dramatic drop in tenants in good standing since the start of the pandemic – a TNP survey last year saw the percentage drop from 81.52% in Q1 to 73.5% in Q2. This happened in part due to the high number of jobs lost while others had to settle for a reduction in income. After the lockdown restrictions eased there was some recovery as tenants could make arrangements to settle their rental debt. However, the massive reduction in interest rates (and mortgage rates) has since enticed many former ‘good tenants’ to buy a home rather than rent according to FNB senior economist Siphamandla Mkwanazi.

In short, good tenants are in great demand. In this scenario leading property portal Property24 and their Assisted Rental Service is cause for discomfort with some of their customers from the real estate sector. Launched in July 2019, the service offers to advertise rental properties for landlords who are not using an estate agent to rent their property. Estate agents pay a lot to advertise their listings on Property24 – in the current tight times, seeing the portal advertise a service that estate agents provide, has many feeling a bit uncomfortable.

Overstepped the line?

“Property24 has definitely stepped over the line,” says Tony Clarke, managing director Rawson Property Group. “It seems that Property24 is under pressure to diversify but the challenge is that the entity has established itself as the dominant portal delivering leads to the real estate industry for many years, to now being in direct competition with the real estate industry which they serve. This is not something that will be easily digested by many real estate CEO’s and agents,” he adds.

Others are not so concerned. Berry Everitt, CEO of the Chas Everitt International property group, says Property24 is entitled to develop its business in whatever way it thinks is best but adds that he finds it interesting that the portal views estate agents as its competitors now and not just as clients. “But it is true that agents have always had a choice about where to advertise their stock – and choice and competition are ultimately always good for the consumer,” he ends.

Jacqui Savage, national rentals manager of the Rawson Property Group, says the rental service of Property24 is just another form of listing a property as a private landlord and does not take away the need for an estate agent to rent out a property. “There is no tenant vetting, viewings done for the landlord, no completing of all the necessary legal documents including FICA etc. These are essential steps that need to be followed and a rental expert would be able to provide these services, she explains.

However, Clarke says providing this service could make it more difficult for rental clients to understand their options without the help and guidance of a rental expert. Furthermore, he has heard many real estate CEO’s and agents express how tired they are of being exploited by the property portal using the real estate network to boost their business.

For smaller independent agencies the last thing they need is any form of competition from a major property portal, especially one they are supporting. Andrew Sadomba, principal of Y Rent Properties, says for many years he and other practitioners have paid a lot of money to advertise their services on the portal and now it seems they want to ‘eat from the same plate’ as their customers. “For a portal to do real estate services is a bit uncomfortable for us as stakeholders of Property24. They have been supporting us but now they want to push us out of business by taking up our space. Obviously, it will be their listings first on top of their portal before our listings,” says Sadomba.

The trust issue and the possible detrimental impact on smaller start-up rental agencies also concerns Xoliswa Tini, founder and CEO of Xoliswa Tini Property Group. She says it would be interesting to understand what parts of this initiative are purposefully transformative and how much collaboration there has been with the Estate Agency Affairs Board (EAAB) who would gauge the benefits and empowerment capacity of the initiative for small businesses. “At face value, this move appears likely to suppress, possibly eliminate small start-up companies’ ability to find their roots in the industry. It is not clear how this product will give smaller companies the ability to do more business,” she says.

‘Just an advertising service’

However, Property24 CEO JP Farinha says they do not believe that their rental service offers any real competitive threat to estate agents. Since the launch of the service the uptake has been small. “There are not many landlords that make use of this option. It is only the few who wish to advertise privately without the assistance of an estate agent,” says Farinha.

According to him Property24’s service doesn’t compete with estate agents because of the following reasons:

  • They do not take photographs, capture listings or write descriptions
  • The customer creates the listing themselves
  • They do not conduct viewings, but merely assist in making an appointment for the landlord
  • They do not advise the landlord which tenant to select
  • They do not negotiate the rent, chose the tenant or complete the contract
  • They do not engage in long-term property management
  • Users of the service are private landlords who are not using an estate agent to rent their property

“What we are offering is an advertising service which includes management of the leads, making the viewing appointments and credit-checking potential tenants. It is for this reason that we can charge a relatively low flat fee as opposed to the comprehensive service that an estate agent offers,” he explains.

Nevertheless, the fact remains that an income is generated out of a rental assistance service. Considering the current legislation, an argument can be made that if a company like Property24 generates an income out of the marketing of rental properties with an end purpose to facilitate a rental agreement, then they must meet the same regulatory requirements as do rental agents. “If they want to join us on our plate, they have to first register with the EAAB like we all did before we started operating. If they are charging a tenant finding fee for their services they need to register first with the regulatory body or authority,” says Sadomba.

Property Practitioner or not?

The Property Practitioners Act (PPA) was signed into law towards the end of 2019 and is expected to commence within this year thereby replacing the Estate Agency Affairs Act. It can be argued that Property24’s rental assistant service would include the entity under the definition of estate agent. This argument gains even more traction under the definition of a ‘property practitioner’ in the new Act.

The PPA defines a property practitioner as “any person who, for the acquisition of gain, directly or indirectly, on the instructions or on behalf of another:

  1. sells, purchases, manages or publicly exhibits for sale any property or business undertaking;
  2. leases or hires or publicly exhibits for hire any property or business undertaking;
  3. collects or receives money payable for a lease;
  4. provides, procures, facilitates, secures or otherwise obtains or markets financing for or in connection with the management, sale or lease of a property or business undertaking; and/or
  5. renders services as an intermediary to effect the conclusion of an agreement to sell or let a property or business undertaking (except where this is not done in the ordinary course of the person’s business; where it is done by a natural person in their personal capacity, or where the person is an attorney, candidate attorney or sheriff)”. (Source: The Property Practitioners Act: What is it all about?)

According to Jan le Roux, chief executive of Rebosa, a good argument could be made that Property24 in terms of the rental service they provide, would fall within the definition of a property practitioner. “Looking at the services that Property24’s rental service provides, it is clear that Property24 does more than merely provide an advertising service but instead actively facilitates matters with the primary objective of it resulting in the conclusion of a lease,” explains Le Roux. “If my view in this regard is correct, then it would be the case that Property24 is acting as a property practitioner in terms of the definition of that term,” he says.” If Farinha is correct an estate agent need only to say that the landlord is advertising the property, not the agent, to not have to comply with the Act – clearly not a legal approach. The points Farinha makes is irrelevant in analysing the definition.”

The call ultimately would lie with the regulating authority. Farinha comments he agrees that the Property Practitioner definition is indeed very broad and depending how it is read may well include any business that advertises properties for sale including online portals. “We will therefore look to the relevant authority to instruct us on what is intended with the new act before trying to interpret it ourselves,” he ends.

In the meantime, as mentioned by Everitt, estate agents are free to choose what advertising resources they would use to market their services and listings.

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