Credit: Property24 Article - 24 Jan 2022.
As of 1 February 2022, the new Property Practitioners Act (PPA) will officially commence.
Not only is the PPA a consumer-focused piece of legislation that has
been designed to protect consumers in the property industry - but it
will bring about significant changes to the property sector.
According to Tony Clarke, Chairman of the Real Estate Business Owners of South Africa (REBOSA),
this is a welcome step in the right direction for an industry
previously plagued by unclear and often poorly implemented legislation.
“The PPA clears up a lot of the grey areas in the previous
legislation,” he says. “We’re really looking forward to the clarity it
brings, along with the additional protection it gives consumers by
formally legislating processes that we’ve considered best practice for
some time.”
Disclosure
One of the most important new consumer protections, according to
Clarke, is the now-compulsory inclusion of a comprehensive property
defects disclosure document for both property sales and rentals.
“At REBOSA, we’ve been encouraging this for several years now,” says
Clarke, “but under the PPA it will be officially illegal to accept a
mandate from a seller or a landlord without receiving a comprehensive
disclosure document first. This document must be signed by all parties
and attached to the sale or lease agreement. It’s a valuable
reinforcement of our ethical responsibility to ensure open and honest
property transactions.”
Certification
Disclosure isn’t the only area in which the PPA is tightening up on
legislation. It also requires any business earning a commission or
brokerage from the sale or lease of a property to hold not just a valid
Fidelity Fund Certificate (FFC), but tax clearance and BBE certificates
as well.
To reduce the administrative burden, however, new FFCs will be valid
for a period of three years instead of one. Fees have also been
standardised across all professional levels. Only Candidate Property
Practitioners will pay a different, reduced fee for the first two years
of their candidacy, after which the standard fees will apply.
“We’re particularly pleased with the fact that FFCs are also no
longer linked to a specific employment position,” says Clarke.
“Certificates will now remain valid if an agent progresses to principal,
for example, or changes employers.”
As for the issuance and policing of FFCs, Clarke is hopeful that
processes will be better managed under the Property Practitioners
Regulatory Authority or PPRA which replaces the Estate Agency Affairs
Board.
For now, digital application processes and downloadable FFCs are a
step in the right direction. So is the amnesty offered to agents
previously operating non-compliantly (provided they are not subject to
criminal investigation or prosecution).
However, Clarke says the automatic approval now legislated for
applications not processed by the Authority within the stipulated time
may not be as effective as intended.
“Realistically, we’re expecting teething problems with FFC
applications,” he says. “Not only will more people being applying for
FFCs under the broader definition of ‘property practitioner’ in the Act,
the already-flawed systems have not been updated to handle the other
changes the legislation brings. Having automatic approval as a fallback
to avoid the massive backlogs we’ve seen before is a good idea.
Unfortunately, that approval is almost impossible to prove without the
accompanying certificate.”
While the Authority is mandated to provide a certificate within 10
working days of automatic approval, Clarke says these processes seldom
follow the designated timelines. As a result, certified agents could
still face delays, making it difficult to receive commission from
conveyancers who are legally obligated to confirm the validity of both
the agent and their agency’s FFCs before making payment.
Trust Accounts
Thankfully, not all processes are getting more complicated under the
PPA. Clarke says the changes to trust account requirements, in
particular, will provide welcome administrative and financial relief to
many property practitioners.
“Previously, all property practitioners needed to have a trust
account, regardless of whether or not they handled trust monies,” he
says. “Those accounts, idle or not, accrued bank fees and forced
businesses to undergo a full – and expensive – annual audit.
“Now, property practitioners only need a trust account if they
actually handle trust monies,” he continues. “If you use a dedicated
third-party payment processing agent or intermediary with their own
compliant trust account, there is no need for you to have a trust
account of your own. That means your business accounts can go through a
far simpler and more affordable annual review. Clarke adds that it is
very important to note that an exemption application is a prerequisite
to not having your own trust account.”
Training
The new regulations also promise smoother and more affordable
property practitioner training. “Under the PP Act, prospective agents
can study and sit their Professional Designation Examination (PDE)
before joining an agency,” says Clarke. “No more year-long internships
or expensive NQF4 exams. If you’ve passed your PDE, you can literally
start selling property in less than six months – under supervision –
provided you complete a further six practical course modules.”
Businesses are now also allowed to develop and run their own CPD training for a dramatically reduced CPD fee.
“Course content must be approved by the Authority, but this approval
can’t be unreasonably withheld,” says Clarke. “Those doing CPD training
via the Authority should also have a smoother experience, as all course
modules can now be available at all times and at a reduced fee, ie
R1500. This should make issues like delayed course content a thing of
the past, supporting agents in honing their skills rather than acting as
a professional roadblock.”
Transformation
Better support for agents is at the heart of changes to the
Transformation Fund, too. It will be run by an independent body
appointed by the PPRA. Clarke is hopeful that this will finally see the
fund fulfil its potential as a force for positive industry change.
“There are a lot of great transformation initiatives outlined in the
new regulations,” he says. “My personal favourite is the training,
development, and financial support being made available to existing
historically disadvantaged property practitioners. Increasing the
diversity of new recruits is important, but I believe change can happen
faster if we help those already in the industry prosper and grow, and
support the creation of more job opportunities.”
Equal Opportunity
Small businesses may also soon be tapping into new opportunities
within security estates and other developments. This, Clarke says, is
due to the PPA’s abolition of the practice of charging real estate
agents “Accreditation Fees” in return for exclusive rights to property transactions within a development.
“Sellers and landlords within estates will no longer be limited to
their development’s approved agents,” says Clarke. “This gives all
businesses – large and small – a fair chance to win mandates based on
the quality of their service instead of the size of their bank account.”
Developers will also no longer be able to sell their own properties
without registering as a property practitioner, providing more
opportunity for real estate agencies to provide this service.
Industry Consultation
“Overall, we’re very pleased with the direction the PPA is taking our
industry’s regulations,” says Clarke. “It’s also good to know that the
PPRA has been formally mandated to consult with the property
practitioners it governs and I formally invite the new PPRA's board, to
regularly do so, especially during the transitional phase, which will
see some challenges and interpretational issues arising and that the way
the PPRA is going to apply these new regulations is going to be
critical to achieving the results that the PP Act wishes to achieve.
We also thank all the Real Estate industry associations that
participated in commenting on the draft regulations. “Overseeing an
industry of this scale is a gargantuan task. REBOSA is eager to assist
in any way possible to ease the coming transition and help the new
legislation realise its promise.”
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