Property Practitioner's Act 2019 Study Notes PDF

**Contents** {#contents.TOCHeading} ============ [Chapter 8 3](#chapter-8) [THE PROPERTY PRACTITIONER'S ACT 22 OF 2019 3](#the-property-practitioners-act-22-of-2019) [Introduction 3](#introduction) [Definition of a Property Practitioner 4](#definition-of-a-property-practitioner) [Description of 'Property Practitioner' 5](#description-of-property-practitioner) [Application of the Act 6](#application-of-the-act) [Principle Property Practitioner 6](#principle-property-practitioner) [PRACTICAL IMPLICATIONS OF THIS DESCRIPTION 7](#practical-implications-of-this-description) [Company directors and members of a close corporation 8](#company-directors-and-members-of-a-close-corporation) [Employee property practitioners 8](#employee-property-practitioners) [Position of an attorney and his employees 9](#position-of-an-attorney-and-his-employees) [Candidate Property Practitioner 9](#candidate-property-practitioner) [The Property Practitioner's Regulatory Authority 10](#the-property-practitioners-regulatory-authority) [Board of Authority 11](#board-of-authority) [Powers and duties of the Board of Authority 11](#powers-and-duties-of-the-board-of-authority) [The Property Sector Transformation 13](#the-property-sector-transformation) [Compliance and Enforcement 14](#compliance-and-enforcement) [Compliance Notices 15](#compliance-notices) [The Property Practitioners Fidelity Fund 18](#the-property-practitioners-fidelity-fund) [Actions against the Authority in respect of the Fund 20](#actions-against-the-authority-in-respect-of-the-fund) [Position of employee property practitioners 24](#position-of-employee-property-practitioners) [How does one apply for or renew a fidelity fund certificate? 25](#how-does-one-apply-for-or-renew-a-fidelity-fund-certificate) [Fidelity Fund Certificates to be Industry Specific 26](#fidelity-fund-certificates-to-be-industry-specific) [Prohibition on rendering services without Fidelity Fund certificate 26](#prohibition-on-rendering-services-without-fidelity-fund-certificate) [Mandatory time periods for Issuing of Certificates 27](#mandatory-time-periods-for-issuing-of-certificates) [Persons disqualified from being issued with Fidelity Fund certificates 27](#persons-disqualified-from-being-issued-with-fidelity-fund-certificates) [Circumstances under which a property practitioner is obliged to cease acting as a property practitioner 30](#circumstances-under-which-a-property-practitioner-is-obliged-to-cease-acting-as-a-property-practitioner) [Withdrawal or lapse of Fidelity Fund certificate 30](#withdrawal-or-lapse-of-fidelity-fund-certificate) [Mandatory display of Fidelity Fund certificate 32](#mandatory-display-of-fidelity-fund-certificate) [Trust Accounts 33](#trust-accounts) [Duty to keep Accounting records and other documents 35](#duty-to-keep-accounting-records-and-other-documents) [Property Practitioner not entitled to remuneration in certain circumstances 36](#property-practitioner-not-entitled-to-remuneration-in-certain-circumstances) [Limitation on relationships with other property market providers 36](#limitation-on-relationships-with-other-property-market-providers) [CODE OF CONDUCT FOR PROPERTY PRACTITIONERS 37](#code-of-conduct-for-property-practitioners) [Candidate Estate Agents 39](#candidate-estate-agents) [CONSUMER PROTECTION 40](#consumer-protection) [Mandatory Disclosure Form 40](#mandatory-disclosure-form) [Agreements 41](#agreements) [Disciplinary action 41](#disciplinary-action) [MISCELLANEOUS MATTERS 45](#miscellaneous-matters) [Penalties for a contravention of the Properties Practitioners Act 46](#penalties-for-a-contravention-of-the-properties-practitioners-act) [Chapter 9 47](#chapter-9) [An Estate Agent and his Client 47](#an-estate-agent-and-his-client) [Introduction 47](#introduction-1) [Who is an estate agents client? 47](#who-is-an-estate-agents-client) [Termination of Mandate 54](#termination-of-mandate) [Canvassing 54](#canvassing) [Rendering a professional service to a client 55](#rendering-a-professional-service-to-a-client) [A estate agent's legal and ethical obligations towards his client 60](#a-estate-agents-legal-and-ethical-obligations-towards-his-client) [Chapter 10 65](#chapter-10) [An Estate agent's Relationship with Prospective Buyers and Lessees 65](#an-estate-agents-relationship-with-prospective-buyers-and-lessees) [Introduction 65](#introduction-2) [Rendering a professional service to a prospective buyer 65](#rendering-a-professional-service-to-a-prospective-buyer) [An estate agent's legal and ethical obligations towards third parties 69](#_Toc112367035) [Chapter 11 73](#chapter-11) [Commission 73](#commission) [Introduction 73](#introduction-3) [How does one determine whether or not an estate agent is legally entitled to commission? 73](#how-does-one-determine-whether-or-not-an-estate-agent-is-legally-entitled-to-commission) [The \'closing' agent's right to payment of commission 74](#the-closing-agents-right-to-payment-of-commission) [An \'introducing\' agent\'s right to payment of commission 75](#an-introducing-agents-right-to-payment-of-commission) [Avoiding commission disputes: what the code of conduct requires of an estate agent 79](#avoiding-commission-disputes-what-the-code-of-conduct-requires-of-an-estate-agent) [Settlement of commission disputes 80](#settlement-of-commission-disputes) [The party liable for payment of commission 81](#the-party-liable-for-payment-of-commission) [Is the amount of a estate agent's\' commission prescribed by law? 82](#is-the-amount-of-a-estate-agents-commission-prescribed-by-law) [Is it permissible for an estate agent to withdraw his commission from a deposit held by him in trust? 82](#is-it-permissible-for-an-estate-agent-to-withdraw-his-commission-from-a-deposit-held-by-him-in-trust) Chapter 8 ========= THE PROPERTY PRACTITIONER'S ACT 22 OF 2019 ========================================== Introduction ------------ The Property Practitioner's Act 22 of 2019 applies to all property practitioners in the RSA, which include property practitioners. The Act replaces the Estate Agency Affairs Act 112 of 1976. The Property Practitioner's Act 22 of 2019 does away the title 'estate agent': the persons who performs the functions usually attributed to property practitioners is now called a property practitioner. The term property practitioner also includes other service providers not previously deemed to be property practitioners. The underlying purpose of the Act is to safeguard the interests of members of the public in their dealings with property practitioners. It makes provision for the following: D A specific description of a property practitioner; D The establishment of the Property Practitioner's Regulatory Authority which will replace the Estate Agency Regulatory Authority; The Authority is governed and acts through a Board known as the Board of the Authority; D Requirements to be complied with by any persons intending to become property practitioners; D To regulate the affairs of all property practitioners; D Promote the meaningful participation of historically disadvantaged individuals in the property market; D To allow for the transformation in the property sector and D To provide for the consumer protection The main provisions of the Act are discussed in this chapter in broad outline. After studying the chapter, a student will understand The Act's description of 'property practitioner'; The Boards objective and the powers it has to pursue this objective; How the Property Practitioner's Fidelity Fund protects members of the public in their dealings with property practitioners; What a fidelity fund certificate is and the requirements to be complied with in order to be issued with such certificate; What a trust account is and how the Act regulates the keeping of trust accounts by property practitioners; Under what circumstances a property practitioner must cease operating as a property practitioner; and What constitutes conduct deserving of sanction for a property practitioner and how disciplinary action can be taken by the Board against a property practitioner found guilty of conduct deserving of sanction Definition of a Property Practitioner ------------------------------------- Who is all a Property Practitioner? A property practitioner means any natural or juristic person who, for the acquisition of gain, directly or indirectly, on the instructions of or on behalf of another, holds himself out as a person who: a. By auction or otherwise sells, rents, purchases, or publicly exhibits for sale property or any business undertaking and canvasses in respect thereof; b. Let's or hires or publicly exhibits for hire any property or business undertaking, whether by electronic means, and also includes anyone who canvasses or undertakes to offer these services; c. Collects or receives money payable on account of a lease; d. Provides, procures, facilitates, secures, or otherwise obtains or markets financing for or in connection with the management, sale or lease of a property or a business undertaking (but excluding financial institutions as provided for in the financial services board act 97 of 1990); e. Manages a property on behalf of another, for remuneration; and/or f. Renders services as an intermediary or facilitator with the primary purpose to effect the conclusion of an agreement to sell and purchase, or let a property or business undertaking (except where it is done by a natural person in their personal capacity; or where an the person is an attorney or candidate attorney or sheriff. The definition extends well beyond the property practitioners industry. It includes auctioneers, developers, property managers, franchisees, providers of bridging finance and bond brokers (except either of these fall within the definition of "financial institution"). For the purposes of certain provisions, it also includes all directors of companies, members of close corporations, trustees of trusts, and employees of property practitioners, if the entity does any of the above. Description of 'Property Practitioner' -------------------------------------- For practical purposes a person is a property practitioner only if he falls within the scope of the definition of \'property practitioner\' in the Property Practitioner's Act. The Act distinguishes between five categories of property practitioners, namely - Companies, close corporations, and private individuals acting as property practitioners, either alone or in partnership (commonly known as 'principal property practitioners') - Directors of companies that are property practitioners as well as certain members and managers of close corporations that are property practitioners - Persons employed by a principal property practitioner and who render certain services on his behalf (commonly known as 'employee property practitioners') - Persons employed by an attorney and who render certain services on his behalf (other than an attorney or an articled clerk) - Candidate property practitioners Property practitioners have different rights and duties under the Property Practitioner's Act depending on the category under which they are classified. Each category is discussed briefly. Application of the Act ---------------------- The Property Practitioner's Act (herein after the Act) applies to the marketing, promotion, sale, letting, financing, and purchase of immovable property and to any rights, obligations, interests, duties or powers associated with or relevant to such property. Principle Property Practitioner ------------------------------- A principal means a property practitioner who is the director of a company, member of a CC, trustee of a trust, partner of a partnership or owner of a sole proprietorship that operates as a property practitioner. A principal property practitioner is defined as any person who, for the acquisition of gain on his own account or partnership, in any manner holds himself our as a person who, or directly or indirectly advertises that he, on the instructions of or on behalf of any other person, performs the following acts in respect of immovable property, an interest in immovable property or a business undertaking: - buys or sells; - negotiates to buy or sell; - canvasses, or undertakes or offers to canvass a seller or purchaser; - publicly exhibits for sale or to let; - let's or hires; - negotiates to let or hire; - canvasses or undertakes or offers to canvass a lessee or lessor; - collects or receives and money payable on account of a lease of immovable property or any business undertaking; or - renders any other service which the Minister may specify by notice in the Government Gazette. The acts and services listed above are collectively referred to as \'a property practitioner service\'. Services specified by the Minister as estate services include the collection of sectional title or share block levies. PRACTICAL IMPLICATIONS OF THIS DESCRIPTION ------------------------------------------ - A company or close corporation rendering an estate agency service is itself a principal property practitioner (assuming the other requirements of the definition are complied with). An ordinary individual is a principal property practitioner if he or she renders any of the services in the circumstances set out in the definition. - Not every person who sells property on a commission basis is automatically a principal property practitioner. To qualify as a principal property practitioner, a person must: a. hold himself out as someone who renders, *or* b. directly or indirectly advertise that he renders, - an estate agency service on the instructions of or on behalf of any other person. Whether a person holds himself out as a property practitioner or directly or indirectly advertises that he is one, depends on the facts of each particular case. - A person is a principal property practitioner only if he renders an estate agency service *on the instructions of or on behalf of any other person.* Accordingly, a person selling his own property cannot be a principal property practitioner. - A person who *canvasses* a seller, purchaser, lessor or lessee for a property is a principal property practitioner if the other requirements of the definition are complied with. Thus, so-called \'finders\' or \'spotters\' *(i.e.* persons who receive a payment or fee for bringing to the attention of a property practitioner on an ongoing basis that a particular property is on the market or that a particular person is interested in buying a certain property) are normally principal property practitioners. - A person who is only involved in the negotiation of building contracts or in the arrangement of finance for property transactions is not a principal property practitioner. This is because he is not involved in buying/selling or letting/hiring *immovable property* on behalf of someone else. Note however that money received by a property practitioner in respect of a building contract constitutes trust money and must be deposited into such property practitioner\' trust account: see the discussion below. Company directors and members of a close corporation ---------------------------------------------------- Under the Property Practitioner's Act the *all* directors of a company are property practitioners if the company is a property practitioner. Th directors are therefore property practitioners whether or not they are actually involved in negotiating the sale or lease of immovable property. In the case of a close corporation which is a property practitioner, all members who are *competent and entitled* to take part in the running of the business and the management of the close corporation are property practitioners, whether or not they actually sell or let immovable property. Shareholders in a company are not automatically property practitioners, nor are members of a closed corporation who are not competent and entitled to take part in the running of the business and management of the closed corporation. For example, if the members of a closed corporation have agreed in an association agreement that a certain member is not entitled to manage the corporation, that member is not a property practitioner for purposes of the Property Practitioner's Act. Such member may then not render any estate agency service for or on behalf of the closed corporation. Employee property practitioners ------------------------------- Any person employed by a property practitioner is an employee property practitioner if he performs on behalf of the (employer) property practitioner any estate agency service referred to earlier, *including (i)* an employee who merely collects or receives money payable on account of a lease and *(ii)* an employee who renders those services specified in the Government Gazette by the Minister *(i.e.,* collection of sectional title or share block levies). A property practitioner's receptionist or telephonist is also a property practitioner if she canvasses buyers, sellers, or lessors or lessees. for a property, in addition to her other duties. Show house attendants are property practitioners, even if they are not directly involved in negotiating sale or lease agreements. For the purposes of the Act, an *independent contractor* who performs estate agency services for a principal property practitioner, is also regarded as an employee property practitioner. (Strictly speaking an independent contractor is not regarded as.an employee in the true sense of the word, because he does not normally fall under the supervision and control of the principal.) Many property practitioners working for an estate agency business are in fact independent contractors and not employees as such. For the purposes of the Property Practitioner's Act this distinction is however irrelevant: all salespersons working for an estate agency business are employee property practitioners as far as the Act is concerned, even if they are independent contractors and not true employees. The distinction between employees and independent contractors is nevertheless important for other purposes, for example certain labour laws apply to employees only, not independent contractors. Position of an attorney and his employees ----------------------------------------- An attorney is not a property practitioner even though he performs services rendered by a property practitioner, provided he renders those services in the course of, in the name of and from the premises where he is practicing as an attorney. Thus, an attorney who sells immovable property in the process of administering a deceased estate is not a property practitioner. Certain employees of an attorney are however property practitioners. A discussion of their position falls outside the scope of these notes. Candidate Property Practitioner ------------------------------- A candidate property practitioner means a person who has not yet met all the qualification or experience as prescribed, to practice as a property practitioner and who is undergoing training under the supervision of a property practitioner, or a programme created by the Authority. In terms of section 64 of the Act, a candidate property practitioner may not draft or complete any document or clause in a document- Conferring any mandate on any property practitioner to perform any act referred to in paragraph (a), (c) or (d) of the definition "property practitioner" in section 1 or Relating to the sale or lease of property If the candidate property practitioner performs such an action and if the principal allows such an action, there will be no entitlement to any payment, remuneration, consideration, or damages in respect of the transaction or agreement embodied in that document. In any proceedings in respect of sanctionable conduct, it is no defense that the principal says that he was not aware of such actions. If the principal conducts business from more than one office, he must make provision for mentors/ full status property practitioners to be available to assist the candidates in the drafting or completion of the documents. **It is therefore in the interest of the principal and the candidate property practitioner that:** The CPP immediately applies for their 1^st^ Fidelity Fund Certificate on signature with the property company. Technically an intern can become full status within their 14 -18^th^ month of being part of the industry. It is not in the interest of the company or the CPP to be employed as a career intern., because then you will always have to have a mentor/full status agent/principal with the CPP when they draft or complete documents pertaining to mandated, sales, leases, service level agreements The Property Practitioner's Regulatory Authority ------------------------------------------------ Section 5 of the Property Practitioner's Act provides for the establishment of a juristic person known as the Property Practitioner's Regulatory Authority. The Authority is governed through a Board known as the Board of Authority and is accountable to the Minister. The Authority must provide regulatory mechanisms in respect of the financing, marketing, letting, hiring, sale, property consumer education and purchase of property, and may do all that is necessary or expedient to achieve the objects of the Act. Section 6 details the functions of the Authority as follows: - To regulate the conduct of property practitioners in their dealings with consumers, including the marketing, managing, financing, letting, hiring, sale and purchase of property; - To regulate and ensure that there is compliance with the provisions of the Act; - To ensure that consumers are protected from undesirable and sanctionable practices as set out in section 62 and 63; - To regulate any other conduct which falls within the ambit of the Act; - To provide for the education, training and development of property practitioners and candidate property practitioners; - To educate and inform consumers about their rights as set out in section 69 and - To implement measure to ensure that the property sector is transformed as set out in Chapter 4 of the Act. Board of Authority ------------------ The Board must have at least nine, but not more than twelve non-executive members, including the chairperson, appointed by the Minister, as well as a CEO, who serves on the Board by virtue of his or her office. The total number of Board members must consist of persons with sufficient financial expertise, relevant legal experience, sufficient experience as property practitioners, sufficient experience in rural and land reform, and sufficient experience in the promotion and protection of the consumer interests, and also include at least one member nominated by the Minister of Trade and Industry and one member nominated by the Minister of Public Works. Powers and duties of the Board of Authority ------------------------------------------- The functions of the Board are to--- - ensure that the Authority complies with this Act and any other applicable law; - ensure that the Authority performs its duties efficiently and effectively; - provide corporate governance for the Authority; - determine and enforce the broad policy framework within which the Authority must pursue its objects and perform its functions; - ensure that the Authority exercises its powers in accordance with the principles of transparency and accountability; - manage the marketing, promotion, sale, lease, financing, purchasing, registration and transfer of property of the Authority; - advise the Minister on various affairs including the efficacy of this Act; the state of transformation of the industry; prescribing of regulations; and education and training of property practitioners. Under the Property Practitioner's Act no person may practice as practitioner unless he or she is in possession of a fidelity fund certificate. · The power to issue and withdraw fidelity fund certificates vests in the Authority. The Authority is *obliged* to issue a person with a fidelity fund certificate (provided the application for a certificate is submitted in the prescribed manner) *unless* he or she is subject to one of the disqualifications listed in the Act. While the authority is not obliged to issue a certificate to a person so disqualified, it *may* do so (subject to such conditions as the Board with the concurrence of the Minister may determine) if it considers this to be in the interest of justice. The disqualifications are discussed later. There are also certain other (technical) grounds upon which the Board may refuse to issue a certificate, for example if a fine payable to the Board has not been paid and no arrangement for payment been made or where the Board would be entitled to immediately withdraw a certificate after it has been issued. The Authority may withdraw a fidelity fund certificate issued by it if the holder of the certificate - is a principal property practitioner who has failed to: - have the accounting records relating to his business audited within four months after the final date of his financial year; - balance his books and records relating to his trust account on a monthly basis; or - have his trust account audited within four months after the end of his financial year. - is a company or a close corporation and the fidelity fund certificate issued to any director of the company or member of the close corporation has lapsed (see below); - Has without any just cause failed to attend a disciplinary inquiry after having been summoned in the prescribed manner to do so; or - Has been found guilty by the board of conduct deserving of sanction. The Authority is empowered to bring and investigate a charge· of conduct deserving of sanction against any property practitioner and to impose certain penalties on a property practitioner if found guilty of conduct deserving of sanction. In appropriate cases compensatory award can be made in favour of a person who suffered a loss by reason of the conduct of the property practitioner concerned. See the discussion below. The Authority is empowered to introduce an examination for property practitioners, but the standard of the examination must be approved by the Minister. Exemption from the examination can only be given by the Minister after consultation with the Board. In terms of the current exam[i]nation regulations, a person who has not been exempted from the examination can obtain full status as an agent by either a. passing the examination; or b. working as a candidate property practitioner for a period of one year. It is therefore not compulsory to pass the examination to obtain full status. A person who has not worked as a candidate property practitioner' for a period of 12 months cannot, however, start his own estate agency business unless he has passed the examination. The Property Sector Transformation ---------------------------------- Section 20 provides that the Property Sector Transformation Code, as amended from time to time will apply to all property practitioners. When procuring property related goods and services, all organs of state must use the service of property practitioners who comply with BEE and employment equity legislation. The Authority is directed to take steps to ensure an inclusive and integrated property sector and ensure transformation. The Authority is obliged to implement, assess, and promote measures to ensure transformation. [The] [Property Sector Transformation Fund] The Authority must within six months of establishment, open a Property Sector Transformation Fund which will receive grants from the Property Practitioners Fidelity Fund. This Fund will be used by the Authority to promote transformation by amongst others, promoting black- owned firms and principals, encourage participation of historically disadvantaged people and work with SETA to develop training and development of historically disadvantaged people, which must include recognition of prior learning. [Property Research Centre] A property research centre is also established. The centre, must, amongst others, conduct market research, increase the research and innovation, be a central repository of knowledge, support transformation, identify barriers to entry and meaningful participation of historically disadvantaged people and promote customer awareness and education. Compliance and Enforcement -------------------------- [Inspectors] Section 24 provides that the Authority must appoint any suitably qualified person as an inspector and must issue each inspector with a certificate and ID card which must be shown to any person who is affected by an Inspector's actions or who requests to see this. The powers of the Inspectors are set out in section 25. Inspectors will have various powers, including the right to, without a warrant, at any reasonable time and without prior notice, enter and inspect the business premises of any property practitioner, to inspect any records, accounts and or documents. Where a property practitioner conducts his business at a private residence, the Inspector must give advance notice inwriting and must set out the details of the inspection. Inspectors may further on authority of a warrant (issued by a judge or magistrate) enter and search premises or a person on the premises, unlock any facility or room, request information, take extracts from books, documents or computers and seize and remove any of the aforementioned. The inspector may be accompanied by a police officer who may use necessary force to enter premises. The warrant may be executed only during the hours of 08h00 and 17h00 of a day other than a Saturday, Sunday, or public holiday, unless a judge or magistrate decides otherwise if circumstances justify it. These warrants are subject to a variety of rules more fully set out in the Act. Compliance Notices ------------------ The Minister must determine contraventions of the Act that are of a "Minor" in nature and of a "Substantial" nature. The Minister must by notice in the *Gazette* prescribe maximum fines for each type of contravention. The Minister has now in Chapter 8 of the Regulations dealing with "Administrative and other matters" set out and classified various contraventions in the Act as minor and substantial and has prescribed the maximum fines. The Authority may, where an Inspector on investigation finds a contravention of the Act and such contravention is of a minor nature, issue the appropriate compliance notice calling for compliance within a reasonable time. The Authority may, in the compliance notice, determine a fine to be paid, if the person, in writing, acknowledges that there was in fact a failure to comply. The fine must be paid to the Authority within a specified time specified in the compliance notice. Where the fine is paid, there may be no further prosecution for the contravention. [Fine as compensation] The Authority may order that any portion of a fine imposed, may be applied toward the payment of compensation to any person who has suffered a pecuniary loss as a result of the conduct of a practitioner. No payment may be made until all appeals in respect of the fine have been finalised or abandoned. This section does not preclude any person from referring a dispute against a property practitioner to the Authority. However, any award made must take the fine account. [Lodging of Complaints] Any person may lodge a complaint to the Authority on the prescribed form. The authority must, in writing, within seven days acknowledge receipt and may call for more information or documents. [Mediation] The Authority may refer a matter for mediation if it believes the complaint can be resolved this way or on application by the person concerned. The Authority must within seven days appoint a mediator who must, with seven days, give notice of the mediation to the parties concerned and set the matter down within 30 days. Property Practitioners may by consent refer inter- Property Practitioners' dispute for mediation by the Authority -- on a cost recovery basis. If the matter is not resolved through mediation, the matter must be referred to adjudication. [Adjudication] Section 30 provides for adjudication. An Adjudication notice is sent in the following circumstances: - Where there is failure to comply or timeously comply with a compliance notice; - Where there is a failure to pay a fine imposed; - Mediation has failed; - The nature of the complaint and contravention is serious and warrants adjudication. The adjudicator must be an independent legally qualified person appointed by the Authority. Within 14 days of appointment, the adjudicator must give notice and set the matter down within 60 days. The hearing must be attended to expeditiously in accordance with prescribed procedure. The adjudicator must render a decision to uphold the complaint or not. If upheld, the Adjudicator must make an order which, in the circumstances, is appropriate. The order made has the status of a magistrates' court decision and may include: - A fine not exceeding an amount determined by the Minister of Justice; - An order that not more than 80% of the fine be paid as compensation to the complainant; - Any other appropriate order under the circumstances. The adjudicator must provide written reasons for the decision. [Adjudication Appeal Committee] The decision of an Adjudicator may be appealed to the Adjudication Appeal Committee which committee must comprise of three suitable qualified independent persons. The committee must be formed within 14 days and set the matter down within 60 days. After the hearing, a decision must be made and communicated with written reasons. [Funds of the Authority] Chapter 6 of the Act deals with the issues around the source of funds for the Authority. Whilst there are various sources of funding, there is one that is of interest and relevance to Property Practitioners. Where the Authority conducts an inspection or an investigation and finds that a property Practitioner has failed to comply with a duty imposed by the Act and the Authority has incurred costs in the proceedings instituted, or has incurred a liability for audit fees, the Authority may recover the costs of such inspection or investigation in so far as it relates to the duty or may recover the taxed costs on an attorney client scale, or such audit fees, from the Practitioner. Concerned. The Property Practitioners Fidelity Fund ---------------------------------------- The Fund established in terms of the Estate Agency Affairs Act, known as the Estates Agency Fidelity Fund, will continue to operate as if it were established under the Property Practitioner's Act and will be known as the Property Practitioners Fidelity Fund is controlled and managed by the Property Practitioner's Regulatory Authority. The primary purpose of the fund is to reimburse persons who has suffered a financial loss as a result of theft committed by a property practitioner who was in possession of a Fidelity Fund certificate at the time of the theft or who suffered loss as a result of the failure by a property practitioner to open a Trust Account; or who has removed trust money while not yet lawfully entitled to it or not receiving a lawfully instruction in writing to make payment from the Trust Account to any person. Regulation 20 provides that the Fidelity Fund may pay a claimant in respect of each cause of action a maximum of R 2 000 000, but certain requirements must be complied with before a person is entitled to enforce a claim against the Board for compensation from the fund. A claim for compensation from the Fund must be lodged with the Authority in the prescribed manner. *Under which circumstances can a claim against the Fund be made?* The Authority must only consider a claim against the Fidelity Fund if the claim is lodged within three years of the incident giving rise thereto. In terms of the Act, the Fund is held and applied to reimburse persons who suffer pecuniary loss by reason of: a. *theft* of trust money committed by a property practitioner who was in possession of a Fidelity Fund certificate *i.e.:* i. any money or other property entrusted by or on behalf of any persons to a property practitioner in his capacity as such; ii. any money collected or received by a property practitioner' and payable in respect or on account of any estate agency service; or iii. any other money, including insurance premiums, collected or received by a property practitioner and payable in respect of immovable property or any business undertaking or building contract; b. the failure of a principal property practitioner to open and keep a separate trust account with a bank; c. the failure on the part of a principal property practitioner or any of his employees to forthwith deposit trust money in the firm\'s trust account; or d. the payment of money from a trust account by a principal property practitioner before such property practitioner is lawfully entitled or instructed to make the payment. To succeed in a claim under paragraph *(a),* it must be shown that the theft was committed by a property practitioner as defined in the Property Practitioner's Act. Under paragraph *(c)* a claim would succeed against the fund if it can be shown that a person has suffered a loss by reason of the fact that a property practitioner had failed forthwith to bank trust money received by him. Therefore, it is not necessary under paragraph *(c)* to show that the property practitioner has *stolen* the money; it would be sufficient to show that the money has been lost (for example stolen by a third party) because the property practitioner to whom the money had been entrusted had failed to pay it into his trust account forthwith. In terms of paragraph *(d)* there would be claim against the Fund if, for example, the purchaser of a proposed sectional title unit suffered a loss because the developer of the scheme was liquidated before completion of the development and the property practitioner to whom the buyer had entrusted a deposit had paid the deposit from his trust account to the developer before the sectional title register had been opened. A person is not entitled to claim against the Authority unless such claimant has notified the Authority of the claim within three years after the circumstances giving rise to such claim, or unless the claimant has furnished the Authority with written proof when requested to do so, within the three-year period referred to aforementioned. A person is not entitled to claim against the Authority in respect of theft of trust money by a property practitioner unless such a person has, before lodging a claim with the Authority, laid a criminal charge against that property practitioner. The Fund may also authorize grants from the fund with regards to, amongst others, research into the business of property practitioners, maintenance, and promotion of a standard of conduct and/or training standards of property practitioners and transformation of the property sector. The Authority may arrange group insurance to cover property practitioners' liability to members of the public Actions against the Authority in respect of the Fund ---------------------------------------------------- No person may start any action against the Authority for payment from the Fund after the expiry of three years from the date on which the Authority has notified them in writing that their claim has been rejected or requires his co-operation in investigating the claim. The following persons have *no right of action* against the Authority for compensation from the Fidelity Fund: - The spouse or immediate family member of a property practitioner by reason of any theft committed by such property practitioner or - Any property practitioner by reason of negligent or intentional conduct, including any theft committed: - by his business partner; or - if the property practitioner is a company, by any director of the company; or - if he is a director of the company, by any co-director of the company; or - if the property practitioner is a close corporation, by any member of the corporation; or - if he is a member of a close corporation, by any member of the corporation; or - by any person employed by him as a property practitioner. ***What are the implications for a property practitioner if the Board has to compensate a member of the public from the fidelity fund because of the property practitioner's\' actions or omissions?*** - If the Authority settles a claim against the fidelity fund, all rights, and remedies of the claimant against the parties responsible for the loss pass to the Authority. This means that if the Authority pays compensation to a claimant who suffered a loss through theft by a property practitioner, the Authority is then entitled to take legal steps against the property practitioner to recover from the property practitioner the amount paid out by the Authority. - A property practitioner who steals trust money, or who fails to bank trust money forthwith, is guilty of conduct deserving of sanction. This entitles the Authority to withdraw the property practitioner fidelity fund certificate, thereby effectively prohibiting him from further acting as a property practitioner. - If the Authority has paid compensation to anyone as result of any act or omission on the part of a property practitioner, that agent is *disqualified* from obtaining a Fidelity Fund certificate unless he has repaid the relevant amount in full to the Authority or has made satisfactory arrangements for settlement. **Requirements to be complied with** in **terms of the Property** Practitioners **Act when acting as a property practitioner** ***Position of principal property practitioners (i.e. companies, close corporations, partnerships and sole proprietors acting as property practitioners)*** Principal property practitioners must comply with the following formal legal requirements when acting as property practitioners: [Fidelity Fund Certificates] A principal property practitioner may not perform any act as a property practitioner unless a valid *fidelity fund certificate* has been issued to him *and (i)* to every person employed by him as a property practitioner as well as *(ii)* in the case of a company and a close corporation, which are property practitioners, to every director of the company and every property practitioner member of the close corporation. A fidelity fund certificate is valid until 31 December of the year in which it will expire. A principal property practitioner must, not later than 31 October of that year, apply to the Authority. [Trust account and handling of Trust money] Every principal property practitioner must open and keep at least one separate trust account with a bank, whether or not the firm actually handles trust money. The Authority must be notified forthwith of the name of the bank at which a trust account has been opened and the account number. A principal estate agent may open additional trust accounts with a bank as the need arises. The name of the bank where these further trust accounts are kept, with the relevant account numbers, must also be furnished to the Authority. · If a property practitioner does not immediately require the money deposited in his trust account, he may *invest* it in a separate savings or other interest-bearing account opened by him with any bank. The PP must invest such money at the best interest rate available at the bank or building society where he keeps his trust account. The PP must pay the full amount of the interest accrued to the person entitled to it. A principal property practitioner and his employee must forthwith deposit into the firm's trust account all trust money held or received by the firm. A property practitioner, before he receives money in trust, must disclose to the parties concerned that unless they agree to whom interest earned on such money be paid the interest may accrue to the PPFF. A principal property practitioner must at all times complies with the specific provisions contained in the code of conduct in respect of trust money and interest. A principal property practitioner must retain trust money in the firm\'s trust account until he is lawfully entitled or instructed to make payment therefrom to any person. A trust account must furthermore be administered in the manner prescribed by regulation. [Accounting records and auditing] Every principal property practitioner must keep accounting records of his activities as a property practitioner, in one of the official languages, which fairly reflect and explain the state of affairs of: - all money received or expended by him; - all his assets and liabilities; and - all his financial transactions and the financial position of his business. A principal property practitioner must also keep separate accounting records of any money deposited by him in his trust account and of all money invested by him in any savings or other interest-bearing account. The books and records relating to these accounts must be balanced at intervals of not more than one month. All the accounting records referred to above must be audited by an auditor within six months after the final date of the financial year of the principal property practitioner. The final date may not be changed by a principal property practitioner without the prior written approval of the property Practitioner's Regulatory Authority. [Changes in the firm\'s operations] When a property practitioner leaves a firm, the firm must, within 14 days, return the property practitioners' certificate to the Board with a letter informing the Board of a termination of employment. If the information is available, it must also be stated with whom the property practitioner is taking up new employment. If the employer cannot return the certificate, he must notify the Board of the termination within 14 days and state why he cannot return the certificate. He must also furnish all available information on the whereabouts of the property practitioner. The Board must be notified within 14 days of any changes in the information supplied to it when application was made for the issue of a fidelity fund certificate to a firm. These include changes to name, address or telephone details or trust account and a change of auditors. If a principal property practitioner's\' name or business address has changed, his fidelity fund certificate must be returned to the Board for amendment and re-issue. [Position when a principal property practitioner ceases to do business] When a principal property practitioner ceases to do business as a property practitioner, the Board must be notified of this and all the fidelity fund certificates issued to the firm, its principals and the property practitioners working for it must be returned to the Board. On termination of business, the principal property practitioner must proceed to wind-up its trust, savings, or other interest-bearing account in the prescribed manner. Position of employee property practitioners ------------------------------------------- Employee property practitioners must comply with the following requirements when practicing as property practitioners: - [Fidelity fund certificates] Every property practitioner working for an estate agency business must be in - [Handling of trust money] - [Position when an employee property practitioner ceases to act as a propertypractitioner] - [Specific requirements concerning candidate property practitioners] How does one apply for or renew a fidelity fund certificate? ------------------------------------------------------------ Every property practitioner, excluding a property practitioner referred to in paragraph (g) of the definition of "property practitioner," must **every three years,** apply to the Authority for a Fidelity Fund certificate. The application must be made on a form prescribed by the Authority, and it must be accompanied by the prescribed levy and contribution to the fidelity fund. An application for renewal must lodged on the prescribed form and in the prescribed manner by 31 October of the year in which the certificate will expire. Companies and close corporations acting as property practitioners must apply in their own names for fidelity fund certificates, but they are exempted from payment of the levy to the Authority and the contribution to the fidelity fund, provided a fidelity fund certificate has been issued to each director (in the case of a company) and each property practitioner member (in the case of a close corporation). When the Authority receives an application and the relevant fees it must issue a Fidelity Fund certificate, provided the applicant meets all the requirements under the Act and is not disqualified from being issued with a Fidelity Fund certificate. The certificate is valid until December of the last year to which such application relates. As stated earlier, every property practitioner to whom a Fidelity Fund certificate has already been issued for a particular year must, by not later than 31 October of the year in which the certificate will expire, apply to the Authority for a certificate for renewal. This application must be in the manner prescribed by the Authority, and it must be accompanied by the prescribed levy payable to the Authority. A property practitioner which is a trust, must, within the prescribed period and manner, apply to the Authority for a registration certificate, and such application must be accompanied by the fees prescribed in section 34. No application for the renewal of a Fidelity Fund certificate need be made if *(i)* a property practitioner has ceased or will cease to act as a property practitioner before the end of the year in question, and *(ii)* he has advised the Authority of this in writing. A late application for the renewal of a fidelity fund certificate, as well as an application not accompanied by the prescribed levy, is subject to payment of a penalty. No Fidelity Fund certificate will be issued until the levy and penalty have been paid. A property practitioner may not use or display a lapsed Fidelity Fund certificate. A property practitioner must, upon request of from any relevant party, produce a Fidelity Fund certificate or certified copy thereof. Should a property practitioner contact details change while holding a valid Fidelity Fund certificate, must provide the Authority of his new contact details in writing, within 14 days of such change taking place. - An employee property practitioner must, with his application for a fidelity fund certificate, ·submit a letter signed by the firm he works for, confirming that he is in the service of that firm. Fidelity Fund Certificates to be Industry Specific -------------------------------------------------- In terms of Regulation 26, a practitioner shall hold a separate Fidelity Fund certificate in respect of each different industry in which he operates. A separate application must be lodged with the Authority in respect of each such Fidelity Fund certificate required. Prohibition on rendering services without Fidelity Fund certificate ------------------------------------------------------------------- 1. No person or entity may act as a property practitioner unless- a. he or she or it has been issued with a Fidelity Fund certificate; or b. if he or she or it employs any other person as a property practitioner, that person has also been issued with a Fidelity Fund certificate. 2. If an entity is a company, a close corporation, a trust or a partnership, every director of such a company, every member of such a close corporation, every trustee of such a trust and every partner of such a partnership, must have been issued with a Fidelity Fund certificate. 3. Any person who contravenes or fails to comply with subsection (1) is guilty of an offence. 4. A person who contravenes or fails to hold a Fidelity Fund certificate must, immediately upon receipt of a request from any relevant party in writing, repay any amount received in respect of or as a result of any property transaction during such contravention. 5. A person who fails to comply with a request contemplated in subsection (4) is guilty of an offence. Mandatory time periods for Issuing of Certificates -------------------------------------------------- The Act obliges the Authority to issue the certificate within 30 working days unless the Authority on good grounds, informs the applicant that the period has been extended. Such extension may not exceed 20 working days. The 30-day working period starts if the Authority requires additional documents. If the Authority had failed to issue the certificate within the 30 working days, the application deemed approved and must be issued within 10 working days. Persons disqualified from being issued with Fidelity Fund certificates ---------------------------------------------------------------------- The Property Practitioner's Act provides that the Authority may not issue a Fidelity Fund certificate to any person who, amongst other things: - is not a S.A citizen and who does not lawfully reside in S.A - has at any time in the preceding five years, been found guilty of contravening the new Act or the Estate Agency Affairs Act, or any similar legislation in any other jurisdiction; - has been found guilty by a court in S.A. or elsewhere in any civil proceedings to have acted fraudulently, dishonestly, unprofessionally, dishonorably, or in breach of a fiduciary duty, or of offence for which such a person has been sentenced to imprisonment without the option of fine; - has, at any time in the preceding five years by reason of improper conduct, been dismissed from a position of trust; - is of unsound mind; - is an unrehabilitated insolvent whose trustee has not certified that the insolvent is a fit and proper person to assume a position of trust and to be issued with a fidelity fund certificate; - is not in possession of a valid tax clearance certificate; - is not in possession of a valid BEE certificate; - has been found guilty of unfairly differentiating, distinguishing, or excluding directly or indirectly anyone on the basis of race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth. - has been prohibited by legislation from practicing as a property practitioner; - has at any time been found guilty of an act or omission· which resulted in compensation being paid from the fidelity fund, unless he has repaid the amount in full to the Authority or has made satisfactory arrangement with the Authority to repay the amount in full; - has in the past had his fidelity fund certificate withdrawn by the Authority because of conduct deserving of sanction; *or* - has not complied with the prescribed standard of training. This means that a person is disqualified from being issued with a fidelity fund certificate as a principal property practitioner (or as a director of an estate agency company, or a property practitioner member of a close corporation which is a property practitioner or a trustee of a trust) if he has not i. passed the Authority examination (or been exempted); *or* ii. worked as a candidate property practitioner for a period of 12 months. - An estate agency business (company, close corporation, sole proprietorship, or partnership) is disqualified if it did not close and balance its accounting books and records at the end of each month during the previous financial year, or if it did not submit its accounting records for auditing within six months after the end of its previous financial year. - An estate agency business is disqualified if it carries on or intends to carry on business as a property practitioner under a trade name which is identical or confusingly similar to the trade name of another property practitioner - i. already issued with a fidelity fund certificate; or ii. whose fidelity fund certificate is suspended or has lapsed or been withdrawn in terms of the Act. - Directors of a property practitioner company and property practitioner members of a property practitioner close corporation are disqualified from being issued with fidelity fund certificates if: In these circumstances not only *current* directors of a company and members of a close corporation are disqualified, but also directors and members of the company or close corporation who were in office *within a period of six months before any of the events referred to above occurred.* - *As explained earlier, if a person is disqualified from being issued with a fidelity fund certificate, the Authority is not obliged to issue him with such a certificate but may do so if it considers this to be in the interest of justice. A property practitioner who becomes. subject to any of the disqualifications referred to above, after he has been issued with a fidelity fund certificate, must immediately cease doing business and return his certificate to the Authority: see the discussion below.* Circumstances under which a property practitioner is obliged to cease acting as a property practitioner ------------------------------------------------------------------------------------------------------- *Any individual property practitioner is obliged to cease acting as a property practitioner if his fidelity fund certificate lapses or is suspended; or* *his fidelity fund certificate has been withdrawn by the Authority, a committee of inquiry or a Court; or* *the firm he works for is no longer in possession of a valid fidelity fund certificate.* Withdrawal or lapse of Fidelity Fund certificate ------------------------------------------------ - *The Authority may withdraw a Fidelity Fund certificate issued to---* - - *a person or trust becomes subject to any disqualification.* - *A person who is in possession or in control of any Fidelity Fund certificate which has been withdrawn in terms of subsection (1) must refrain from using or displaying that Fidelity Fund certificate.* - *A court may, on good cause and upon application by the Authority or any other competent person, withdraw any Fidelity Fund certificate issued to any person, and thereupon order that the person or any other person to immediately refrain from using and displaying that Fidelity Fund certificate.* - *A Fidelity Fund certificate lapses immediately and is of no force and effect if the person to whom it has been issued---* - *A person who is in possession or control of a Fidelity Fund certificate which has been withdrawn or has lapsed must immediately return that certificate to the Authority, or if that Fidelity Fund certificate cannot be returned, submit a declaration made under oath or affirmed as to the reasons and circumstances preventing the property practitioner from doing so.* - *A person whose Fidelity Fund certificate has been withdrawn or has lapsed, may not directly or indirectly participate in the management of any business carried out by a property practitioner or participate in the carrying out of such business, or b employed, directly or indirectly, in any capacity in such business, except with the written consent of the Authority.* - *A property practitioner may not directly or indirectly in any capacity whatsoever employ a person contemplated above, or allow or permit such person directly or indirectly to participate in any capacity in the management or the carrying on of his, her or its business as a property practitioner, except with the consent in writing of the Authority* - *The Authority has no liability whatsoever in respect of the withdrawal or lapse of a Fidelity Fund certificate, except where the withdrawal was due to the Authority's negligence.* - *A person, partnership or trust whose Fidelity Fund certificate has been withdrawn or lapsed in terms of this section may re-apply for a Fidelity Fund certificate when it, he or she again qualifies for such a certificate.* - *A person who uses or displays the Fidelity Fund certificate which has been withdrawn, is guilty of an offence.* Mandatory display of Fidelity Fund certificate ---------------------------------------------- *A holder of a certificate must prominently display the certificate at every place where he conducts business, to enable customers to easily inspect it.* *The holder must ensure that the prescribed sentences regarding the holding of a Fidelity Fund certificate is reproduced in legible lettering on any letter head or marketing material relating to that Property Practitioner.* *In addition, any agreement relating to any property transaction entered into by the Property Practitioner, must include the prescribed clause which ensures that the practitioner guarantees the validity of the certificate.* *Any person who contravenes the above commits an offence.* *Regulation 37 of the Regulations deals with the above:* 1. *1.The following wording must appear on all letterheads or marketing material pertaining to a property practitioner: "Registered with the PPRA".* *Where a candidate estate agent is making use of such letterheads or is referenced in such marketing material, the fact that such individual is a candidate estate agent must be clearly stated.* 2. *An agreement in connection with a property transaction to which the property practitioner is a party must contain a clause in the following terms:* *"\[Insert name of property practitioner as defined in the agreement\] hereby warrants the validity of his/her/its Fidelity Fund Certificate as at the date of the signature of this Agreement"* Trust Accounts -------------- - *Every property practitioner must: (i) open and keep one or more separate trust account/s; (ii) appoint an auditor; (iii) provide the Property Practitioners Regulatory Authority (Authority) with all information with regards to the trust account/s and auditor appointed; (iv) deposit all trust money in the relevant trust account; (v) keep separate accounting records in respect of the trust account/s and cause them to be audited.* - *Despite subsection the above, any property practitioner may invest in a separate savings or other interest-bearing account opened by him, her or it with any bank any monies deposited in his, her or its trust account which are not immediately required for any particular purpose.* - *A property practitioner must retain all trust money deposited, until he, she or it---* - *Any bank which manages trust accounts for purposes of this Act must, from time to time as prescribed, submit a certificate to the Authority declaring interest in respect of that account.* - *Every property practitioner must---* *A property practitioner whose turnover is less than R2.5 million must have his accounting records subjected to an independent review by a registered accountant.* - *A property practitioner must, after receiving an audit report, submit that report to the Authority.* - *The Authority may on good cause at any time order a practitioner, by written notice, within a period of not less than 30 days, to submit an audited statement of his books.* - *The Authority may apply to a court to prohibit any practitioner from operating his trust, savings or other interest-bearing account and the court may appoint a curator bonis to control such.* - *If the Authority refuses to issue a Fidelity Fund certificate, or the certificate has been withdrawn or lapsed without being renewed, or the practitioner ceased to act as such, or becomes disqualified, the practitioner concerned must immediately wind up his/her/its trust account, savings account or interest-bearing account and pay out to the persons entitled to it.* - *Any practitioner who winds up an account which contains unclaimed money or has held monies in his/her/its trust account of which the owner or beneficiary could for longer than three years not be identified must pay that money into Fund to be held in trust.* - *All monies referred to above, which remain unclaimed for a period of 30 years, is forfeited to the Fund.* - *Despite any other law, no trust money which may have been into any other account than a trust account or interest-bearing account, becomes part of any such whether it has been paid in erroneously or not, and does not lose its nature or characteristics.* - *A property practitioner must annually confirm or update the details of his/her/its auditor.* *However, in terms of Section 23 of the PPA, the Minister may by notice in the Gazette determine the circumstances under which certain property practitioners may be exempted from keeping trust accounts; and determine a different dispensation for the review of accounting records for those property practitioners.* Duty to keep Accounting records and other documents --------------------------------------------------- *Section 55 provides that a property practitioner must for a period of 5 years, retain the following documents:* *A property practitioner must forthwith on request provide the Authority with a legible certified copy of any document requested. The documents may be stored electronically if such storage meets the requirements of the Electronic Communications and Transactions Act.* *A property practitioner who contravenes the above is guilty of an offence.* *Regulation 40 in Chapter 8 of the Regulations deals with "Document Retention" and provides that the following documents must be retained for the purposes of section 55 of the Act:* 1. *copies of all electronic communications sent or received by the property practitioner to and from members of the public in the course of carrying out its activities as a property practitioner.* 2. *where a property practitioner employs any other property practitioner, copies of all electronic communications sent or received by such employee property practitioner to or from members of the public in the course and scope of carrying out his or her employment duties.* *The above obligation does not extend to electronic communications on social media which are generally accessible by members of the public.* Property Practitioner not entitled to remuneration in certain circumstances --------------------------------------------------------------------------- *Property practitioners, and where the property practitioner is a company or close corporation, every director, and every member, is not entitled to any remuneration or any payment arising from an act as* *property practitioner unless at the time of such act he is in possession of a Fidelity Fund certificate.* *Any property practitioner who contravenes this must pay the funds to the Authority and such person entitled to the funds (seller, purchaser, lessor, or lessee) can claim the funds from the Authority within three years. Funds not claimed will be forfeited to the Authority.* *A conveyancer may not pay any remuneration to a property practitioner unless they have been provided with a valid Fidelity Fund certificate:* 1. *during the period or on the date of the transaction to which the payment relates, and* 2. *on the date of the payment* Limitation on relationships with other property market providers ---------------------------------------------------------------- *A property practitioner may not practice in association with any other person who is prohibited by any law, any professional code of conduct or code of ethics or protocol, report or charter on corporate governance, from doing so.* *A practitioner may not enter into an arrangement formally or informally whereby a consumer is obliged to use a particular service provider, including an attorney. A contravention of this could result in any remuneration being repaid to the consumer. The service provider can in addition be required to repay any remuneration received with interest.* CODE OF CONDUCT FOR PROPERTY PRACTITIONERS ------------------------------------------ *The Minister must, after consultation with the Authority, prescribe a code of conduct for property practitioners.* *Regulation 34 sets out the prescribed code of conduct. A property practitioner must on request form a consumer provide him or her with a copy of the code of conduct.* ***Sanctionable conduct*** *Any property practitioner is guilty of sanctionable conduct if he or she or it --* - *In the same transaction acts on behalf of two or more persons whose interests are not in all material respects identical iro the transaction, and receives remuneration from all parties concerned, unless they agreed thereto;* - *Fails to give a full explanation in writing within 30m days, for any act performed, when called upon by the Authority to do so, to any person having a material interest.* - *Fails to pay any monies due to the Authority or iro the Fund within one month after it became due;* - *Fails to furnish in writing within one month any information that the Authority has requested in writing;* - *Fails to comply with or contravenes any provision in the code of conduct;* - *in his or her capacity as a company director, member of a close corporation, or trustee of a trust, which is a property practitioner and which failed to hold a Fidelity Fund certificate, did not take all reasonable steps to prevent such failure;* - *Carries on undesirable practices prohibited in section 63;* - *Commits an offence involving an element of dishonesty;* - *Fails to inform the Authority within 14 days of a change in his, her or its contact details;* - *Differentiates, distinguishes, or excludes consumers on the basis of their race, gender, sex, pregnancy, marital status, ethnic or social origin, sexual orientation, age, disability, religion, culture, language or birth or commit a criminal offence while performing a function as a property practitioner;* - *Fails to comply with or contravenes any provision of this Act.* *The penalty for being guilty of sanctionable conduct is the withdrawal of the Fidelity Fund certificate, imposition of a fine or a reprimand (with noting on the web site). These may be suspended for three years as determined by the Authority.* ***Undesirable Practices*** *The Minister may, in consultation with the Authority, by notice in the Gazette, declare a particular business practice in the market to be undesirable and consequently prohibited. Various factors are set out to determine whether a practice is undesirable. A contravention can result in any remuneration earned being repaid to the consumer.* *Regulation 35 of the Regulations contains some "Undesirable Business Practices"* ***Supervision of Candidate Property Practitioners*** - *A candidate property practitioner may not draft or complete any document or clause in a document---* - *A person who contravenes the above is not entitled to any payment, remuneration, consideration, or damages arising from the transaction.* - *it is no defence that the principal property practitioner was not aware of the acts or omissions of the property practitioner or the candidate property practitioner.* - *A principal property practitioner who conducts business from more than one business premises must supervise and control the property practitioners and candidate property practitioners in his, her or its employ, despite the fact that those property practitioners conduct their business in branch or other offices.* *Note that these provisions appear to be in line with the previous position.* Candidate Estate Agents ----------------------- *Regulation 33.4 deals with the rules around candidate estate agents.* *A property practitioner who registers in the estate agent industry prior to becoming entitled to practice as such shall be known as a candidate estate agent.* *A candidate estate agent cannot act as such unless they have disclosed as far as possible that he or she is candidate estate agent and is acting the active supervision and control a --* *Qualified property practitioner or practicing attorney, with at least three years' experience where applicable). Such supervision and control must be exercised either in person or by means of any electronic medium allowing the property practitioner or practicing attorney immediate contact with the candidate estate agent.* *A candidate estate agent may not hold himself or herself out or advertise as someone who has complied with the educational requirements contemplated in the Regulations or as someone who is no longer subject to any restriction in terms of Regulation 33.3* *A candidate estate agent may not complete or draft any documentation relating to any transaction negotiated by him or her, otherwise than under the supervision of a property practitioner qualified in terms of Regulation 33.1 and who is no longer subject to any restriction in terms Regulation 33.3, and who certifies that the said documentation in question has been completed under his or her supervision.* *The property practitioner supervising the candidate shall be responsible for all acts of a candidate estate agent done in his or her capacity as such, of which the principal property practitioner is aware.* *No person may act as candidate estate agent for a period of exceeding 180 days in aggregate. After the expiry of the 180-day period they must for their Professional Designation Examination, provided that if such person fails to pass, then on good cause shown, the Authority may permit the candidate to register as a candidate for another 180 days.* ***Further Restrictions*** *Regulation 33.3 provides that once a property practitioner qualifies as a non-principal property practitioner, for a period of 6 months thereafter they may not enter into a mandate for the sale or purchase of any property or the letting or hiring of any property or conclude an agreement for the sale or purchase or letting or hiring unless such mandate or agreement has first been reviewed and co-signed by another qualified property practitioner.* *The fellow property practitioner co-signing is obligated to ensure that the mandate or agreement accords with the norms and standards and duties of the industry. However, the co-signor will not assume liability in relation to any matter other than the contents of document in question.* CONSUMER PROTECTION ------------------- Mandatory Disclosure Form ------------------------- *Section 67 of the Act makes it mandatory for a property practitioner procure to procure a completed Disclosure Form (Property Condition Report) regarding the condition of the property from a seller and/or landlord.* *A property practitioner must not accept a mandate to sell or lease property unless provided with a fully completed and signed mandatory disclosure form. This form then must be provided to every purchaser or lessee who wishes to make an offer to purchase or lease.* *The disclosure form must be signed by all the relevant parties and annexed to the agreement. If not completed, signed, or annexed, the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser.* *A property practitioner who fails to comply with the above, may be held liable by an affected consumer.* *The consumer is still free, for his own account, to have the property inspected before finalizing the transaction.* *The property condition report must be kept for 5 years, together with all the other documents that property practitioners must retain.* *Regulation 36 in Chapter 7 of the Regulations contains the "prescribed mandatory disclosure" document. From 1 February 2022, the use of this document is mandatory.* Agreements ---------- *Agreements to sell or lease and disclosure documents must be drafted by the seller or developer for his own account. The Authority must publish an updated version of guideline agreements on its website from time to time.* Disciplinary action ------------------- *In terms of the Property Practitioners Act, certain acts or omissions on the part of property practitioners constitute conduct deserving of sanction. The Act empowers the Authority to hold an inquiry and take disciplinary action against a property practitioner found guilty of such conduct.* *The acts or omissions constituting conduct deserving of sanction are the following:* - *Receiving any remuneration for any act performed by him as a property practitioner from two or more persons whose interests are not in all respects identical in respect of the performance of such act, unless those persons agree thereto in writing.* This means that a property practitioner may not receive commission from both a seller and a buyer without a written agreement between these two parties permitting this. - *Failure to give a proper written explanation of any act performed as a property practitioner, within 30 days of being called upon in writing to do so, to any person having a material interest in the performance of such act.* This means that if, for example, a seller has given a property practitioner a mandate to sell a property and he later enquires from the property practitioner in writing how the matter.is proceeding, the property practitioners must reply in writing within 30 days giving the seller a proper explanation. - *Failure to pay any money due by a property practitioner to the Authority within one month after it becomes due.* Money currently payable to the Authority includes the annual levy to the Authority and any fines which may have been imposed by committees of inquiry. - *Failure to comply in writing with the Authority\'s written request for information which it may reasonably require within a specified period to exercise its powers properly under the Act.* If, for example, the Authority in writing requests a candidate property practitioner to provide details of certain actions by him as a property practitioner, the candidate must reply in writing within the period stipulated in the Authority\'s request. - *Failure to comply with certain provisions of the Property Practitioner Act.* Any property practitioner is guilty of conduct deserving of sanction if he acts as a property practitioner without being in possession of a valid fidelity fund certificate. The same applies should he, without the Authority\'s written consent, employ a person whose fidelity fund certificate has lapsed or been withdrawn, or allow such person to participate in the management or carrying on of his business as a property practitioner. A principal property practitioner *(ie* an estate agency business) is guilty of conduct deserving of sanction if he fails to comply with the provisions of the Act concerning: - *Failure as a director of an estate agency company or as a property practitioner member of a close corporation to take all reasonable steps to ensure that the company or close corporation keeps accounting records and have them audited, or that it opens a trust account and deposits trust moneys therein.* Failure to comply with the provisions of the Act concerning trust accounts and the auditing thereof constitutes conduct deserving of sanction not only for a principal property practitioners, but also for a director of an estate agency company or a property practitioner member of a close corporation if he or she has failed to take all reasonable steps to ensure that the company or close corporation complies with the provisions of the Act in this regard. - *Committing an offence involving an element of dishonesty.* Offences here include theft, fraud, perjury, or the like. - *Completion of contract documents before complying with the prescribed standard of training* Any property practitioner is guilty of conduct deserving of sanction if, in his capacity as a property practitioner, he completes or drafts any clause in a sale, lease or mandate document before he has complied with the prescribed standard of training. - *Contravention of any provision of the code of conduct.* The current code of conduct was published in the Government Gazette on 24 December 1992 and came into operation on 1 April 1993. The full text of the code, together with a commentary on its practical application and implementation, is contained in a publication of the Estate Agency Affairs Authority, entitled *Professional Ethics for Property practitioners.* The contents of this publication are reproduced at the end of this chapter and must be studied carefully by all property practitioners preparing for the Authority examination. ***Who can lodge a complaint against a property practitioner?*** Any person *(ie* any member of the public, including another property practitioner), may lodge a complaint with the Authority if he feels aggrieved by any act or omission on the part of a property practitioner. All complaints are carefully investigated by the Authority before a property practitioner is formally charged with conduct deserving of sanction. In practice many disputes between members of the public and property practitioners are settled amicably, through the intervention of the Authority. ***What penalties can be imposed** if **a property practitioner is found guilty of conduct deserving of sanction?*** If a property practitioner is found guilty of conduct deserving of sanction, the Authority (acting through a committee of inquiry) may: If the Authority withdraws the certificate of a property practitioner company, it may also withdraw the certificate of every director of the company. If it withdraws the certificate of a director of the company which is a property practitioner, the company\'s certificate may also be withdrawn. The same applies to property practitioner members of a close corporation and to a close corporation itself. The Authority or a committee of inquiry may, whenever a fine has been imposed on a property practitioner, order that a portion of the fine (up to a maximum of 80% thereof) be applied towards the payment of compensation to any person who suffered a loss by reason of the conduct of the property practitioner in question. A property practitioner conviction of conduct deserving of sanction may be published by the Authority in the Government Gazette. MISCELLANEOUS MATTERS --------------------- ***Consequences** if **a property practitioner's fidelity fund certificate has lapsed or been withdrawn*** As stated above, a property practitioner whose fidelity fund certificate has lapsed or been withdrawn must immediately stop doing business as a property practitioner. If a certificate has lapsed, it must be returned to the Authority forthwith; if it has been withdrawn it must be returned to the Authority at the Authority\'s request. A person whose fidelity fund certificate has lapsed or been withdrawn may not directly or indirectly participate in the management of any estate agency business, or participate in the carrying on of such business, or be employed, directly or indirectly, in any capacity in such business, except with the written consent of the Authority and subject to such conditions as the Authority may determine. No property practitioner may directly or indirectly in any capacity employ a person whose fidelity fund certificate has lapsed or been withdrawn or allow such person to participate in any capacity in the management or the carrying on of his estate agency business, except with the written consent of the Authority and subject to such conditions as the Authority may impose. ***Completion of contract documents by property practitioners*** In terms of the Property Practitioners Affairs Act a property practitioner who has not complied with the prescribed standard of training may not draft or complete any document (or clause in a document) a. conferring a mandate on the property practitioner (or his firm) to perform an estate agency service; or b. relating to the sale or lease of immovable property. A contravention of this provision constitutes an offence and the property practitioner in question may also be charged with conduct deserving of sanction. Moreover, a property practitioner who has contravened this provision is not entitled to any payment or remuneration for bringing about the transaction or agreement embodied in the document in question. This means that a property practitioner is not entitled to payment of commission in respect of a sale agreement negotiated by him, if he has filled in the sale agreement document for the parties at a time when he has not yet complied with the prescribed standard of training. Penalties for a contravention of the Properties Practitioners Act ----------------------------------------------------------------- a. Any person who contravenes or fails to comply with any provision of the Property Practitioners Act is guilty of an offence and liable on conviction to a fine up or imprisonment for a period not exceeding 10 years. b. A person can be restrained by an interdict from practicing as a property practitioner unless he complies with the provisions of the Act. c. A property practitioner is prohibited from receiving commission unless the requirements relating to fidelity fund certificates have been complied with. The same applies if a property practitioner completes sale, lease or mandate documents before complying with the prescribed training requirements: see the discussion above. Chapter 9 ========= An Estate Agent and his Client ============================== Introduction ------------ An estate agent may commence marketing a property only if he has a mandate (instruction) to do so. The person conferring the mandate is called the estate agent's client. An estate agent must always serve his client in a professional manner and observe the legal and ethical duties which he has towards him. In this chapter attention is given to the relationship between a estate agent's and his client. After studying the chapter, a student will understand a. what a *mandate* is and when a mandate must be in writing; who a estate agents' client is; b. the distinction between an \'open\' mandate, a \'sole\' mandate and a \'sole and exclusive\' mandate, and what a \'multiple-listing service\' entails; c. when a mandate can be terminated; d. what canvassing\' for a mandate entails; e. what it means to render a professional service to a client; f. the legal and ethical obligations of an estate agent towards a client. Who is an estate agents client? ------------------------------- An estate agent's client is the person who gives the estate agent's a mandate to render a particular estate agency service for him. An estate agent working in the residential property market is normally given a mandate by the seller or lessor of a property to sell or let it. In such cases, the seller or lessor is the estate agent's client. There is, however, nothing prohibiting an estate agent's from obtaining a mandate from a prospective purchaser or lessee to find him a property to buy or to rent, in which case the purchaser or lessee will be the client. An estate agent who has a mandate to sell or let a property invariably spends a great deal of time with prospective purchasers or lessees, showing them the property, explaining to them its features, assisting with obtaining finance, etc. However, regardless of the amount of time spent with a prospective purchaser or lessee, the purchaser or lessee is not the estate agents'. client; the seller/lessor remains his client because he was the person who gave the estate agent the mandate to render the estate agency service for him. Nevertheless, although the prospective purchaser/lessee (called a third party) is not the estate agents' client, the estate agent still has certain obligations towards this party. These obligations are discussed in the next chapter. The code of conduct provides that if an estate agent has conflicting mandates in respect of a particular immovable property, the person whose mandate has first been accepted by the estate agent's is regarded as the estate agents' client. Thus, if a estate agent's is given a mandate by seller A to sell a five-bedroomed home in Sandton for R250 000 negotiable, and two days later he is given a mandate by purchaser B to find him a five-bedroomed home in the Sandton area for up to R240 000, A in this example would be the estate agents' client if he introduces B to A\'s property. In terms of the of the code of conduct, the estate agent's would have to disclose to B, before he introduces him to A\'s property, that he has been given a mandate by A to sell the property and that B will not be his client in respect thereof. **Mandates** An estate agent is said to have a *mandate* when he accepts an instruction or authority from a client to render a particular estate agency service for that client. On acceptance of the mandate, a legally binding contract is established between the estate agent's and his client. Generally, a mandate need riot be in writing but can be given verbally. The following mandates *must,* however, be in writing: - A sole mandate (also called a sole agency), including a \'sole and exclusive\' mandate. - A mandate which embodies a *power of attorney* to conclude *certain transactions* on behalf of a client. These transactions are *(i)* contracts of sale of land, and *(ii)* contracts of sale or lease governed by the Share Blocks Control Act 59 of 1980, the Property Time-sharing Control Act 75 of 1983 or the Housing Development Schemes for Retired Persons Act *65* of 1988. Nevertheless, it is always sound business practice to record all mandates in writing as this avoids disputes regarding their existence and terms. If an estate agent is given a verbal mandate, it is advisable to follow this up with a letter confirming the mandate. s However, a letter confirming a mandate which was in fact never given is of no effect; the mere fact that the client fails to reject the letter explicitly does not mean that he accepts its contents and that he has therefore given a mandate to the estate agent's. *\'Open\' mandates, sole mandates and \'sole and exclusive mandates* A person is entitled to appoint as many estate agents as he wishes to sell or let his property unless he has given a specific estate agent's a *sole mandate* or *sole agency* to do so. In a case where more than one estate agent's is given the same mandate by the same client in respect of the same property, each estate agent's is said to have an *open mandate.* In other words, in such a case no estate agent can claim to have the sole right to market the property. The code of conduct defines a *sole mandate* as a\' mandate incorporating an undertaking on the part of the person giving the mandate, not to confer a similar mandate on another estate agent before the expiry of a determined or determinable period\'. This is also the legal definition of a sole date. A sole mandate to sell or let a property is therefore a contract between an estate agent and a client whereby the client agrees *(i)* to appoint that specific estate agent's to sell or let his property and *(ii)* not to appoint another estate agent's to sell or let the property until the sole mandate has been terminated. The effect of a sole mandate to sell or let a property is that, should the client sell or let the property through another estate agent's during the period of the sole mandate, he commits breach of contract. The estate agent can then claim damages from the client which, depending on the circumstances, may or may not be equal to the commission which he would have earned had the property been sold or let through him. At common law a client is entitled to sell or let his property himself, even if he has given a specific estate agent's a sole mandate. However, a sole mandate can be worded to the effect that the client is not entitled to market the property himself, for example by stating that the estate agent's is given sole and exclusive selling rights\' or \'sole right to sell\' or \'sole authority to sell\'. In practice, this is usually referred to as a sole and exclusive *mandate.* Estate agents normally use standard preprinted documents when obtaining sole mandates from clients. The contents of these documents differ widely from one another, and it is imperative that a estate agent's should acquaint himself fully with the terms of the sole ma[n]date document used by the firm he works for. A sole mandate must be signed by the client, and preferably the estate agent concerned as well. Various arguments are advanced from time to time in favour of sole and exclusive mandates, as opposed to open mandates: - An estate agency firm cannot afford the time and money, or provide the quality of service, necessary to sell a specific property if it has only an open mandate. - A seller who confers on more than one estate agent's an open mandate runs the risk of ultimately having to pay more than one commission if and when his property is sold. This risk is considerably reduced if the property is marketed on a sole mandate - see the discussion in chapter 11. - Estate agents trying to sell a property under an open mandate might not conclude the best deal possible for the seller because of the scramble to close the transaction before a competing agent does so. - Open mandates will be assigned a low priority regarding advertising and showings to prospective buyers. - Sellers, especially up-market sellers, do. not want scores of estate agents showing their homes to buyers who may not be genuinely interested in purchasing the property. - In the case ·of a sole mandate, an estate agent may still cooperate with other estate agents in selling the property. The market exposure can therefore be selectively increased. When negotiating a sole mandate, an estate agent's must pay particular attention to the following: - The period of the sole mandate. An estate agent's must appreciate that during the stipulated period of the sole mandate, he in effect has a \'monopoly\' to market the client\'s property, because, until expiry of this period, the client may not sell or let his property through another estate agent's. Moreover, in the ordinary course of events the client cannot, during the currency thereof, revoke the sole mandate. When negotiating the period of a sole mandate each case must be considered on its own - no hard and fast rules can be laid down as to what generally constitutes a reasonable period for a sole mandate. In terms of the code of conduct, the expiry date of a sole mandate must be expressed as a calendar date and must be recorded in the sole mandate document itself. - In practice there are many complaints against estate agents accepting sole mandates without making any attempt to perform the mandate. At common law an estate agent is under no legal obligation to even attempt to sell or let a client\'s property, even if he has a sole mandate to do so. Legally, therefore, a estate agent's may completely ignore a mandate (including a sole mandate) and concentrate on other clients. However, in terms of clause 34.3.1.10 of the code of conduct, an estate agent's may not accept a sole mandate to sell or let a property, unless he has explained in writing to the client what specific obligations in respect of the marketing of the property will be assumed.by him in his endeavor to perform the mandate. The clause does not prescribe any specific obligations but leaves this matter to be negotiated with the seller or lessor (as the case may be). Failure by a estate agents to comply with the obligations specified by him constitutes a contravention of the code of conduct and disciplinary steps can be taken against him. Apart from clause 34.3.1.10, the code of conduct also provides (clause 34.2) that an estate agent must protect the interests of his client to the best of his ability. In terms of this clause, an estate agent's is under a general duty to use his best endeavours to perform a mandate accepted by him. An estate agent's should therefore under no circumstances accept any mandate if he has no firm intention to actively market the client's property. The provisions of a sole mandate may impose certain specific *contractual obligations* on a estate agent, for example to advertise the property for sale in the press on a specified number of occasions during the mandate period, or to take all reasonable steps to put the property on show. - An estate agent should under no circumstances encourage a seller or lessor to grant him a sole and/or exclusive mandate to sell or let a property if such a mandate has previously been granted to another estate agent's and has not yet expired. If the second mandate were granted and the seller/lessor sold or let his property through one sole agent, the other sole agent would have a claim for damages against the seller/lessor. An estate agent should always endeavor to avoid this situation. Termination of a mandate is discussed later. - At common law a seller or lessor is under no obligation to sell or let his property to anyone introduced by an estate agent's, even if the person makes an offer on the exact terms that the seller/lessor had in mind when he conferred the mandate on the estate agent's. However, a mandate can be so worded that a client commits breach of contract if he refuses to sell or let his property to the person introduced by the estate agent. - Some sole mandate documents used by estate agents are worded on the basis that, if after termination of the sole mandate the seller sells to a person introduced to the property by the sole agent during the period of the sole mandate, the seller is obliged to pay the sole agent commission whether or not th

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