PayProp, your regulatory and compliance partner
PayProp, your regulatory and compliance partner
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, big changes are in store for the real estate industry – including some that will make life a lot easier for agents.
That’s because the Act will bring property legislation up to date with current practices and gives timely recognition to the important role of integrated payment platforms in today’s rental market.
Section 23 of the Property Practitioners Act states that the Minister may determine circumstances whereby a property practitioner may be exempted from keeping trust accounts. In addition, exempted property practitioners’ accounting records may undergo a different reviewing process.
Providing more detail, draft regulations 4(2) and 4(3) state that property practitioners who have been exempted and comply with all the requirements of the regulations may be exempted from having to have their business and other accounts audited, and will only be required to have those accounts independently reviewed by a registered accountant.
This creates a great opportunity for property professionals, who can now apply for exemption to audits, which can be costly and laborious.
Draft regulation 4(4) explains this in further detail.
Essentially, 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 in the following terms:
- They must be a property practitioner with a valid Fidelity Fund Certificate (FFC).
- All of an agency’s trust funds must be processed by a payment processing agent for the latter to qualify.
- The payment processing agent must operate a trust environment that complies with the Act and Regulations.
- Within the payment processing agent’s trust environment, there must be separately auditable client accounts at two levels:
- For each agency;
- For each client of each agency (each landlord and each tenant).
- The trust account environment and each of the agency accounts that fall within it must be audited annually.
- Audit reports of the trust environment and each of the agency accounts must be submitted to the Estate Agency Affairs Board (EAAB).
- Agents who are exempted may not hold any trust funds.
Since its inception 17 years ago, PayProp has consistently met these criteria, enabling over 1 250 rental businesses in South Africa to simply and effectively transact with landlords and tenants using its technology.
PayProp has been registered as an estate agency with the EAAB since 2005 and is an accredited Third Party Payment Processor with the Payments Association of South Africa.
The company provides its clients with the highest standards of trust money handling. PayProp’s client trust accounts are opened as designated trust accounts in terms of Section 32(1) and Section 32(2) of the Estate Agency Affairs Act (112 of 1976). In terms of Section 32(8) of the Estate Agency Affairs Act, the “client money” in these trust accounts neither forms part of PayProp’s nor the estate agency’s balance sheet. This means an agency’s business creditors cannot attach these trust funds – as they are always protected.
Trust accounts are intended to ringfence clients’ funds, and to this end PayProp ensures that an agency’s trust accounts are segregated – in the way required by the new draft regulations.
- Firstly, trust account segregation requires separating an agecy’s business and client account funds.
- Secondly, funds paid in and out for a specific property must be ringfenced for that specific property exclusively, so it isn’t used for any other property.
- Thirdly, funds belonging to the tenant – such as a damage deposit – should be kept separate from the landlord’s funds for that property, failing which there may be no be funds left to pay for essential repairs, or to refund the tenant deposit at the end of the lease.
- And lastly, a specific beneficiary’s funds need to be kept separate from other funds belonging to them. For example, the landlord’s own funds kept in trust – for repairs and maintenance during the subsistence of the lease – must not be paid out to the landlord when the tenant underpays their rent.
To maintain the strict financial prudence required to run a trust account, agents should not settle for anything less than the highest levels of trust.
Since PayProp’s inception in 2004, all its clients without exception have enjoyed unqualified trust audits, as has the company’s entire trust environment.
Thanks to its unrivalled credentials in the payment processing space, PayProp’s clients can rest assured that where compliance is concerned, they’re completely ahead of the soon-to-be-introduced legislation.
- PayProp is integrated directly with the banking system, which means it can reflect financial movements in real time and reconcile clients’ trust accounts to the last cent – daily.
- Each agency’s trust account reconciliation is audited once a year by PayProp’s external auditors PriceWaterhouseCoopers. Since different agencies have different financial year-ends, it means that multiple independent annual audits are conducted throughout each year.
- Once the audit is completed at the end of an agency’s financial year, PayProp’s auditors issue an Agreed Upon Procedures (AUP) letter with:
- Trust account balances at year-end
- All interest paid out to tenants
- Confirmation that the trust account never went into deficit
- The AUP will save an agency’s auditor a significant amount of time as it provides all the information needed to complete the audit.
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