INTRODUCTION
The Property Practitioners Act (“PPA”) has come into effect on 1 February 2022. The PPA aims to ensure a healthy property market, to regulate property practitioners and to protect consumers. An important example of consumer protection is the compulsory inclusion of a property defects disclosure form (“disclosure form”) for both property sales and rentals. Regulatory changes focus on matters such as trust accounts, certification, who qualifies as a property practitioner and the Property Practitioner Fidelity Fund.
CHANGES
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- MANDATORY DISCLOSURE FORM
For both sales and leases a completed disclosure form (in a format prescribed by section 36 of the Property Practitioners Regulations, 2022) and signed by all the parties must now be attached to the agreement and forms an integral part of the agreement. It may be noted that this form only refers to “sellers” and it is therefore unclear which format is to be used for lease agreements.
Under the PPA from 1 February property practitioners may not accept a mandate from either a seller or landlord where there is no comprehensive disclosure form. The PPA is silent on whether companies are included in this. If they do accept the mandate, their actions may result in liability towards the affected consumer. If the disclosure form was not completed, signed or attached to the agreement, the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser. The disclosure form is not a substitute for any inspections or warranties, which means that the buyers or tenants can still insist on these in the agreement.
- TRUST ACCOUNTS
Previously, all property practitioners needed to have a trust account, involving bank charges and an annual audit, even if they did not handle trust monies. Under the new PPA property practitioners only need a trust account if they actually handle trust monies. If not, they must have a valid exemption certificate (which involves bringing an application to the Authority explaining their reasoning for the application and the relevant supporting documents). If the property practitioner makes use of an intermediary (someone whose primary purpose is to attempt to
effect the conclusion of an agreement to sell and purchase, or hire and let) who has a trust account as required, the property practitioner will not be required to have a trust account. This will do away with annual audits and save on bank charges.
- CERTIFICATION
Under the PPA any business which earns a commission or brokerage from the sale or lease of a property must have a valid Fidelity Fund Certificate (“FFC”). They will also have to be in the possession of a valid tax clearance and a valid BEE certificate (section 50(a)(vii) & (x) of the PPA). Where the property practitioner is a company, every director must be in possession of an FFC. No property practitioner is allowed to receive remuneration without an FFC.
The administration of FFCs will now be handled by the Board of Authority, which replaces The Estate Agency Affairs Board.
A conveyancer may only pay remuneration or any other monies to a property practitioner once the latter has provided the conveyancer with a certified copy of a valid FFC which is “valid during the period or on the date of the transaction to which such payments relates, and on the date of such payment” (section 56(5) of the PPA).
- PROPERTY PRACTITIONER
Who qualifies as a property practitioner? From 1 February, bond originators, companies selling time shares and commercial property brokers will also be property practitioners. The definition in the PPA casts the net very wide, referring to “any natural or juristic person who in any way acts or provides services as an intermediary or facilitator with the primary purpose to, or to attempt to effect the conclusion of an agreement to sell and purchase, or hire and let” (section 1, subsection (a) – (g)).
- PROPERTY PRACTITIONERS FIDELITY FUND
The Estate Agents Fidelity Fund has been replaced by the Property Practitioners Fidelity Fund. The purpose of this Fund is to reimburse persons who suffer pecuniary loss because of theft of trust money or due to the failure of the property practitioner to comply with their duties relating to trust accounts.
- CONCLUSION
The PPA brings about important changes in the property industry, affecting property practitioners and consumers. Prominent among these are the new regulations on trust accounts and Fidelity Fund Certificates, and the prescribed defects disclosure form for transactions of sale and lease.