Puzzling out the Property Practitioners Act

A fresh start for the real estate industry?

Estate agents don’t have the best reputation. In most cases, this is unfair and undeserved. Many estate agents are hard-working and want to do the best job possible for their clients. Unfortunately, an unscrupulous minority has given the industry a bad name. Estate agents are often stereotyped as pushy, dishonest, and greedy. They are parodied for exaggerating features and downplaying drawbacks. For example: Estate agent’s description: small, easily maintained garden. Reality: window box.

The Property Practitioners Act (the Act) came into effect in February 2022 with the aim of rectifying abuses and offering consumers greater protection in the property market. The Act accelerates transformation in the sector and consolidates various role players. 

Earlier legislation – the Estate Agency Affairs Act

The Act replaces the Estate Agency Affairs Act, which has been in effect since 1976, and it establishes the Property Practitioners Regulatory Authority. The new Act is similar to the Estate Agency Affairs Act in many ways, but updates the legal framework to be more relevant to today’s world.   

Purpose of the Act

The Act applies directly to the promotion and marketing of immovable property as well as management, sale, letting and financing. Its objectives include:

• Further protections and dispute resolution systems for consumers, and consumer awareness raising
• Structures to facilitate the education, training and licensing of Property Practitioners (PPs) 
• A legal framework for the conduct of PPs
• Transformation of the property sector to ensure inclusivity, with meaningful participation for historically disadvantaged people
• The continuation of the Estate Agents’ Fidelity Fund in the form of the Property Practitioners’ Fidelity Fund

Who is governed by the Act?

On the face of it, the Act applies to those who were previously known as real estate agents, and redefines them as PPs. A PP is a person who sells, purchases, manages or publicly exhibits a property for sale in their ordinary course of business. However, the definition of a PP encompasses more than real estate agents. Auctioneers, leasing agents, body corporates, homeowners’ associations, timeshare sales agents and property developers are all classed as PPs. Attorneys are specifically excluded from the definition of a PP, despite their role in the legal transfer of immovable property. 

The Property Practitioners Regulatory Authority 

The Property Practitioners Regulatory Authority (PPRA or the Authority) has replaced the Estate Agency Affairs Board. The PPRA was created primarily to provide more protection for consumers when they are selling, purchasing, leasing, hiring, or financing immoveable property or a business undertaking, and also to regulate, maintain and promote the conduct of PPs. The intention is to make it easier to conduct business in the property sector while ensuring compliance with the Act. 

Notable changes in the new Act

The Estate Agents’ Fidelity Fund, established in 1976, is now known as the Property Practitioners’ Fidelity Fund. The purpose of this fund is to reimburse consumers who have suffered monetary loss due to:

• Theft of their money held in trust by a PP 
• Failure of a PP to hold money in a trust account until it is due to be paid to a third party 
• Failure of a PP to maintain and operate a trust fund properly 

A claim can only be made against the fund when the PP in question holds a Fidelity Fund certificate, and a PP must hold a valid certificate in order to practise. The certificate is industry-specific (e.g., letting agent, property developer, etc.,) and must be prominently displayed in all business premises of the PP (not only the head office if there are multiple offices). In other words, if you are dealing with an estate agent who does not display their Fidelity Fund certificate, they are probably not legitimate and you would be advised to find another agent. Claimants have up to three years from the date of the incident to lodge a claim with the Fidelity Fund. The maximum pay-out is currently capped at R2 million. Given the sums that can be involved in property damages, PPs are advised to carry their own insurance as well. 

Mandatory disclosure of defects

It has always been good practice to divulge any and all defects on a property to prospective occupants, whether purchasers or tenants. However, there was no official requirement to do so and it was not unknown for estate agents to gloss over defects which, to the untrained eye, were either unidentifiable or very well hidden. The Act now makes it compulsory to disclose all defects in writing. There is a mandatory disclosure form which must be signed and “provided to every purchaser or lessee who makes an offer to purchase or lease”. The PP may not accept a mandate from a property owner in the absence of this form. If the PP does not comply with this requirement, they may be held liable by the consumer or even sanctioned by the PPRA.

Prohibited business practices

To eliminate potential conflicts of interest, certain business practices are prohibited by the Act.

Any party that manages a residential property development, including a body corporate or a homeowners’ association, may not receive a reward for marketing properties in that property development.

It is also not permitted to restrict the disposal of a property in a property development only to the residential development or a person or entity designated by it. Any other arrangement that requires a property to use specific services, resulting in an unfair advantage to a particular property practitioner, is prohibited. An example would include requiring a seller to use a particular conveyancer.

The intention is to ensure a free and competitive market, encourage integrity and discourage cronyism. 

The Board of Authority

The Act also establishes the Board of Authority, which is responsible for governing the PPRA. It manages the day-to-day activities of the PPRA, holds PPs accountable to a code of ethics, and ensures enforcement of the PPRA’s policies, exerting disciplinary powers if necessary.

Complaints procedure

If a consumer suspects a PP of misconduct, a complaint can be made in writing to the PPRA via its website. Complaints against PPs will be investigated by the Board of Authority. If found guilty, the PP may be subject to sanctions. For more serious transgressions of the Act, a PP could be convicted of an offence and face a fine and/or imprisonment for up to 10 years.

Consult a legal professional

If you are buying, selling, or letting property, check that the PP handling your property is in possession of a Fidelity Fund certificate and a defects disclosure form is included in the paperwork.

Be wary of poor business practices by PPs and always consult a legal professional if you have any concerns about the conduct of a PP. Simon Dippenaar & Associates, Inc. is a law firm in Cape Town, Johannesburg and Durban, with expertise in rental housing and property conveyancing. Contact one of our attorneys on 086 099 5146 or simon@sdlaw.co.za if you need help with a property matter.

Further reading:

Property ownership transfer

This article first appeared on sdlaw.co.za

Eviction Lawyer

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