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What happened to the Property Practitioners Act No. 22 of 2019 (PPA)? The president has signed the bill into law, but the date the law will come into force is yet to be announced. The Act fully repeals the Estate Agency Affairs Act No. 112 of 1976 (“EAA Act”). Draft regulations were published for public comment in March 2020. But as things stand, there is no indication as to when the PPA will come into effect.
Justine Krige, Director of the Corporate and Business Practice at Cliffe Dekker Hofmeyr (CDH).
When the PPA comes into force, the Act places a number of new obligations on property professionals, not all of which are contained in the EAA Act. So, what are the main obligations of property professionals under a PPA?
1. Compulsory display of Fidelity Fund Certificate (FFC).
The owner of an FFC shall: (i) display his, her or the FFC prominently at any place of business where he, she or he transacts property transactions to enable consumers to easily check it; (ii) ensure that the prescribed sentence about holding an FFC is reproduced on any letterhead or marketing material; and (iii) include in any agreement relating to property transactions a provision establishing the validity of the certificate.
2. Maintaining a loyalty account
Any practitioner shall: (i) open and maintain one or more separate trust account/s; (ii) appoint an auditor; (iii) provide all information regarding the Trust Account and the appointed auditor to the Supervisory Authority (Authority) of the Property Controllers; (iv) deposit all trust funds into the applicable trust account; (v) keep various accounting records relating to trust accounts and cause them to be audited;
3. Obligation to maintain accounting records and other documents
Any investor must retain for five years: (i) all documents exchanged with the Authority; (ii) all agreements, obligations and mandatory disclosure forms relating to the financing, sale, purchase or lease; and (iii) any advertising or marketing material relating to a business such as property management.
4. A realtor is not entitled to a fee in certain circumstances
An estate agent is not entitled to any remuneration unless the estate agent and a company any director of such company holds an FFC. The claimant may not pay any fees or other monies to the claimant unless the claimant provides a certified copy of his, her or his FFC to the carrier.
5. Maintaining compulsory compensation insurance
The Minister may issue a complaint to the PPA regarding a code of conduct or other acceptable conduct violation. In connection with this, an estate agent may take out and order indemnity insurance.
6. Compliance with the Code of Conduct
Every practitioner must abide by a prescribed code of conduct (still published by the Minister of Human Settlements).
7. Complying with the Property Sector Transformation Charter Act
Every practitioner must comply with the Property Sector Transformation Charter Code (still to be published).
8. Giving certain mandatory statements
In order to achieve its goal of being a consumer-focused piece of legislation designed to protect consumers in the property industry, the PPA requires property professionals to submit a “display form” to a seller/landlord and buyer/tenant before completing an order. Before making an offer. The disclosure form must be signed by all parties and attached to the sale or lease. If a disclosure form is not signed and attached, the PPA provides that the agreement must be interpreted as meaning that no defects or defects have been disclosed to the buyer. A real estate agent cannot accept representation unless the seller or landlord submits a fully completed and signed disclosure form.
9. Restrictions on relationships with other property market service providers
Section 58(2) of the PPA prohibits any practice whereby a practitioner provides an inducement to a consumer to use a particular carrier or service provider. This is perhaps one of the most debated parts of the PPA, which has significant practical implications for real estate professionals.
These obligations are expressly intended for the protection of consumers. Any practitioner who contravenes the PPA will be required to repay any fees received for property transactions and may be subject to fines. In addition, anyone convicted of an offense under the PPA is liable to a fine or imprisonment for up to 10 years. Therefore, even if the property professionals do not hold funds in the trust, they must comply with the remaining obligations in terms of the PPA.
Real estate professionals are advised to familiarize themselves with these requirements as they may soon come into effect.
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