ADVERTORIAL
As we await finalisation of the regulations that will give effect to the Property Practitioners Act, agents considering PayProp will be glad to know the country’s leading rental payment processor already ticks all the Act’s boxes. Specifically, PayProp’s trust environment, process flows, audit logs and daily reconciliations all meet the requirements of the new Act and its draft regulations.
We may not know when the Property Practitioners Act (22 of 2019) will take form and effect through its regulations, which are currently still in draft form. However, we can be sure that when it does, significant changes are in store for the real estate industry, including some that will make life considerably easier for agents.
The Act brings property legislation up to date with current practices and gives long-overdue recognition to the important role of integrated payment platforms in today’s rental market.
Audit exemptions under the Property Practitioners Act
Section 23 of the Property Practitioners Act states that the Minister may determine circumstances under which a property practitioner may be exempted from keeping trust accounts. In addition, exempted practitioners’ accounting records may be subject to a different reviewing process.
Draft regulations 4(2) and 4(3) expand on this by stating that property practitioners who have been exempted and comply with all regulatory requirements may also be exempted from having their business and other accounts audited. Instead, those accounts would only need to be independently reviewed by a registered accountant.
This creates a meaningful opportunity for property professionals, as audits can be both costly and time-consuming.
Using an accredited payment processing agent
Draft regulation 4(4) explains the exemption mechanism in more detail.
In essence, property practitioners who use an accredited payment processing agent, such as PayProp, may be exempted from operating their own trust accounts by following a prescribed procedure.
What is an accredited payment processing agent
A payment processing agent is defined by the regulations as meeting the following requirements:
- The agent must be a property practitioner with a valid Fidelity Fund Certificate
- All of an agency’s trust funds must be processed by the payment processing agent
- The payment processing agent must operate a trust environment that complies with the Act and Regulations
- The trust environment must include separately auditable client accounts at two levels
- For each agency
- For each client of each agency, including landlords and tenants
- The trust environment and all agency accounts within it must be audited annually
- Audit reports must be submitted to the Estate Agency Affairs Board
- Agents who are exempted may not hold any trust funds
PayProp’s compliance credentials
Since its inception 17 years ago, PayProp has consistently met these criteria, enabling more than 1 250 rental businesses in South Africa to transact efficiently with landlords and tenants through its technology.
PayProp has been registered as an estate agency with the Estate Agency Affairs Board since 2005 and is an accredited Third Party Payment Processor with the Payments Association of South Africa.
The company maintains the highest standards of trust money handling. PayProp’s client trust accounts are opened as designated trust accounts in terms of Sections 32(1) and 32(2) of the Estate Agency Affairs Act (112 of 1976). In terms of Section 32(8) of the same Act, client money held in these trust accounts does not form part of either PayProp’s or the agency’s balance sheet. This ensures that trust funds remain protected from business creditors at all times.
Trust account segregation
Trust accounts exist to ringfence clients’ funds, and PayProp ensures full compliance with the segregation requirements outlined in the draft regulations.
This includes:
- Separating an agency’s business funds from client trust funds
- Ringfencing funds for each specific property so they cannot be used for other properties
- Keeping tenant funds, such as damage deposits, separate from landlord funds for the same property
- Separating a beneficiary’s funds from other funds belonging to that same beneficiary, such as maintenance reserves
These measures ensure that funds remain available for their intended purpose, including essential repairs and deposit refunds.
Audit track record and reconciliation
Since PayProp’s inception in 2004, all its clients without exception have received unqualified trust audits, as has PayProp’s entire trust environment.
PayProp is integrated directly with the banking system, allowing financial movements to be reflected in real time and trust accounts to be reconciled daily, down to the last cent.
Each agency’s trust account reconciliation is audited annually by PayProp’s external auditors, PricewaterhouseCoopers. Because agencies have different financial year-ends, multiple independent audits are conducted throughout the year.
At the end of an agency’s financial year, PayProp’s auditors issue an Agreed Upon Procedures letter confirming:
- Trust account balances at year-end
- All interest paid to tenants
- That the trust account was never in deficit
This significantly reduces the workload for an agency’s own auditor by providing all required audit information upfront.
Staying ahead of regulation
To maintain the financial discipline required of trust account management, agents should insist on the highest possible standards.
Thanks to its long-standing compliance record and robust trust environment, PayProp clients can be confident that they are already aligned with the requirements of the soon-to-be-implemented legislation.
