Following are some frequently asked questions and answers on the Property Practitioners Act and Regulations.
Expansion of Definition
Property Practitioner now carries with it a wider definition in the Act. Essentially, anyone who deals with Property and related matters in their ordinary course of business falls under the definition of “Property Practitioner”. Some examples of persons who fall under this definition now include:
- Auctioneers of Property
- Persons who market, canvass buyers or negotiate the sale of Property (Estate Agents in the Traditional Sense).
- Persons who let or hires property (Rental Agents)
- Bond Brokers (More commonly called “Mortgage Originators” in South Africa)
- Property Developers
The Estate Agents Affairs Board has ceased to be called by that name. Instead, the old “board” is now known as the Property Practitioner’s Regulatory Authority, or the PPRA. The functions of the PPRA will be relatively similar to the EAAB. Just as Estate Agents are now known as Property Practitioners, the Estate Agent’s Fidelity Fund will now be known as the Property Practitioner’s Fidelity Fund.
Employees of Attorney Firms
Attorneys can sell property and are excluded from the definition of Property Practitioner in the PP Act and Regulations. This is simply due to the fact that Attorneys are regulated by the Legal Practice Council and the public is protected by the Legal Practitioner’s Fidelity Fund. This exclusion is only extended to Attorneys and Candidate Attorneys. Any other individuals / employees working for a firm of attorneys selling property must register as a Property Practitioner with the Property Practitioners Regulatory Authority (PPRA).
Attorneys / Candidate Attorneys do not have to do any qualifying training courses. In terms of the PP Act, prospective Property Practitioners have to pass the Professional Designation Exam (PDE) and complete 6 practical training courses (still to be designed). Unfortunately the PPRA has not been fully prepared in this regard so no directive has been forthcoming as yet and how the training will be implemented is not clear but we are in communication with them on this matter.
Chapter 7: Training, Conduct and Consumer Protection Measures
- Standard of Training
The Authority must consult with various representative bodies to establish:-
33.2 Establishement of the Professional Designation Exam
22.214.171.124 Qualification Standards for Property Practitioners
126.96.36.199 Course materials
188.8.131.52 PDE exams to be written by persons who wish to qualify as Property Practitioners
184.108.40.206 Standards for the practical training of candidates
The Act and Regulations do not include the NQF qualification as a prerequisite to become a Property Practitioner. The Minister has the power to prescribe the training standards applicable to property practitioners, hence the prerequisite of completing an NQF as admission to the Professional Designation Examination “PDE” has been removed. PDE 4 can now be completed before registration as a Property Practitioner or joining a Property Practitioner business or firm. Candidate Property Practitioenr individuals in this category, after obtaining PDE4, need only to complete 6 modules practical training and have their contracts and mandates signed by qualified agents. See Regulations 33.2.3 and 33.3.1. The Authority however have not practice notes in this regard and this has created a lot of confusion and uncertainty.
Natural persons do not require TAX or BEE certificates (Regulations 41.19 and 41.20).
Firms with a turnover of less than R2,5 million are classified as an EXEMPTED MICRO ENTERPRISE (“EME”). These businesses are exempt from calculating a full B-BBEE scorecard. They are only required to produce an EME B-BBEE sworn affidavit. The template can be downloaded from Rebosa’s website (https://www.rebosa.co.za/pscc-affidavit-bee-certificate-when-turnover-does-not-exceed-r-25-million-per-annum/ EME’s are automatically given a level 4, but 100% black owned EMEs are given a level 1, and 51% black owned EME’s are given a level 2.
Qualifying Small Enterprises (QSE’s) threshold qualification is an annual turnover between R2.5 million and R35 million. QSE’s that are 100% black owned are given a level 1, and 51% black owned QSE’s are given a level 2 and these QSE’s only require to give an affidavit to their customers. All other QSE’s require that a BEE verification audit be done by a SANAS accredited agency. QSE’s are required to comply with Ownership as a compulsory element and either Skills Development or Enterprise and Supplier Development.
Where the closure of trust accounts is concerned Regulation 2 should be studied in detail – it is not difficult to apply.
Please find below Regulation 2 – Exemption from Trust Accounts for your ease of reference.
2 EXEMPTION FROM TRUST ACCOUNTS
2.1 Pursuant to the provisions of section 23 (1) of the Act, the following is prescribed –
2.1.1 A property practitioner is exempted from keeping a trust account if –
220.127.116.11 that property practitioner has never received any trust monies, other than as
permitted in regulation 2.4; or
18.104.22.168 no longer receives any trust monies, other than as permitted in regulation 2.4; and
22.214.171.124 that property practitioner submits to the Authority an affidavit in the form set out
below in terms of which affidavit the property practitioner asserts that –
126.96.36.199.1 they are compliant with the provisions of either subregulation 188.8.131.52 or
184.108.40.206.2 they undertake that they will not receive any trust funds after the date of such
affidavit other than as permitted in terms of regulation 2.4, without having first
opened a trust account and having provided the Authority at least 60 days in
advance of receiving any funds in trust, with full details of such trust account,
including the financial institution with which such trust account is held and the
trust account number; and
220.127.116.11.3 the property practitioner provides evidence to the Authority that any previously
existing trust account (including any savings or interest-bearing account referredto in section 54 (2) operated by that property practitioner (other than as permitted
in terms of regulation 2.4 has been finally closed and all funds held in that trust
account have been disbursed in accordance with the requirements of law,
provided that for this purpose any independent review or audit report which is
compliant with regulation 2.2 below, if provided to the Authority will be sufficient
evidence of compliance with the foregoing.
2.2 Where a property practitioner is exempted in terms of subregulation 2.1.1, provided that
such property practitioner has had any previously existing trust account reviewed in terms
of section 23 (1) or audited in terms of section 54 (1) to (7) up to the date on which such
trust account was closed, such property practitioner will not be required to again have such
account reviewed or audited.
2.3 Where a property practitioner is exempt in terms of subregulation 2.1.1 and has complied
with regulation 2.2 foregoing, such property practitioner will be exempted from having to
have its annual financial statements and other accounts audited and will only be required
to have such accounts records independently reviewed by a registered accountant.
2.4 A property practitioner will further be exempt from operating a trust account if such property
practitioner is otherwise compliant with the provisions of subregulation 2.1.1 and if –
2.4.1 such property practitioner has mandated one or more other property practitioners that
specialise in collecting and distributing trust payments (“the payment processing
agents”) to process such trust payments on its behalf, in respect of all trust fundsreceived by that property practitioner;
2.4.2 each payment processing agent mandated by that property practitioner operates a trust
environment that complies with the Act and associated regulations;
2.4.3 each payment processing agent mandated by that property practitioner operates a trust
environment that complies with the Act and associated regulations; and
2.4.4 the trust environment and each of the client accounts operated by the payment
processing agents are audited annually in compliance with the Act and regulations, and
the audit reports in respect thereof are submitted to the Authority in compliance with the
Act and the regulations; and
2.4.5 the property practitioner concerned holds no trust monies whatever outside of the
manner provided for in subregulations 2.4.1 to 2.4.4 foregoing.
2.5 All property practitioners, other than a property practitioner registered as a business
property practitioner with the Authority, are exempt from operating trust accounts.
2.6 A managing agent shall not be required to operate a trust account in respect of a body
corporate where the funds of that body corporate are held in a bank account opened in thename of the body corporate concerned in terms of section 21 (4) (a) of the Sectional Title’s
Schemes Management Act, 8 of 2011.
FORM OF AFFIDAVIT BY BUSINESS PROPERTY PRACTITIONER IN RESPECT OF TRUST MONIES
1 I, [insert name] (identity number [insert identity number]), in my capacity as [insert
capacity] of [insert the name of the business property practitioner concerned]
(registration number [insert registration number]) (the “business property practitioner”)
solemnly affirm that –
1.1 I am duly authorised to make this affidavit on behalf of the business property
1.2 the business property practitioner has never received any trust monies / no longer
receives any trust monies (delete whichever is not applicable);
1.3 should these circumstances change, we undertake not to receive any trust monies
after the date hereof without first –
1.3.1 opening a trust account;
1.3.2 giving the Authority no less than 60 days’ notice prior to such receipt of any trust
1.3.3 furnishing all details pertaining to the trust account to the Authority, which details
must comprise at least the name of the financial institution at which the trust
account is held, and the trust account number. ______________________________ Signature
______________________________ Full name of signatory
______________________________ Identity or registration number of signatory
______________________________ Date of signature
Audits must be completed before trust accounts can be closed hence proceeding with audits is advised.
The PPRA are still in the process of interpreting and developing guidelines in order to apply them correctly.
It would be best to wait until further information is available and for the PPRA to issue formal guidelines before you waste time, effort and money on proceeding without these guidelines.
Much as the legal position is clear that agents need not have trust accounts it will take some time to address the legalities and it is ill advised to act hastily.
FEES (Chapter 4 – 15)
Every Property Practitioner shall pay the Authority R2 340 for an FFC for a period of 3 years (or R780 per annum).
Candidate Property Practitioners shall pay R380 for the candidacy period.
Every Property Practitioner shall upon first being registered pay R400 towards the Fidelity Fund.
i.e. Fees for Candidate Property Practitioners should be R380 + R400 in the first year.
Under the new Act, Conveyancers who attend to the Transfer of that property under the Sale Agreement, may not pay out any remuneration to the Agent in question if they were not in possession of a valid FFC at the time the Sale Agreement was concluded. This means that Agents cannot “fix” their non-compliance by having an FFC issued after the Sale Agreement is concluded – it must be valid on the day the Offer to Purchase is signed!
Property Practitioners do receive some relief under the new act in the case where the EAAB does not issue an FFC but also does not provide a reason or objection to issuing one. Under Section 49, an Agent is deemed to be issued an FFC if the EAAB does not respond to an application for an FFC within 30 working days. Put another way, if an Agent applies for an FFC on time and pays the prescribed fee, they may trade as if they have a valid FFC after 30 working days have elapsed from application date and the EAAB has not given then any feedback or reason as to why the FFC has not been issued. This means that an Agent cannot be restricted from trading due to an administrative malfunction on the part of the EAAB, as was the case in Signature Real Estate v Charles Edwards Properties.
The transition phase allowed for in the PP Regulations only refers to the 6 month period to allow for setting up the Property Sector Transformation Fund.
Mandatory Disclosure Forms
The Act imposes an obligation on property practitioners to request sellers or lessors to produce a duly completed and signed mandatory disclosure form. This is a form that discloses all defects on the property that are known to the seller or the lessor. In terms of Section 67 of the Act, a Property Practitioner may not accept a mandate if this form is not produced.