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According to the new Property Practitioners Act, 2019 (PPA), Property Developers are considered as Property Practitioners.
Section 1 of the PPA states that Property Practitioners (PP’s) include any person who sells, by auction or otherwise, or markets, promotes or advertises any part, unit or section of, or rights or shares, including timeshare and fractional ownership in a property or property development.
Section 2 of the PPA states that the PPA applies to the marketing, promotion, managing, sales, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.
Section 3 of the PPA states that the objects of the PPA are to provide for a just and acceptable legal framework for the marketing, managing, financing, letting, renting, sale and purchase of a property.
Section 4 (1)(2) states that any person may, subject to this section be exempted from compliance with any specific provision of the PPA. The Applicant must in the prescribed manner and form submit the application for exemption to the Property Practitioners Regulatory Authority (PPRA).
Section 23 (2) (a) states that the Minister may, by notice in the Gazette, determine circumstances under which certain PP’s may be exempted from keeping trust accounts.
Section 48 (1) states that no person may act as a PP unless he has been issued with a Fidelity Fund Certificate (FFC) and if the PP employs any other person as a PP, such person has also been issued with an FFC.
Section 48 (2) states that if the PP is a company, every Director of such company must have been issued with an FFC.
Section 50 (a)(vii) states that the PPRA may not issue a FFC to any person who is not in possession of a valid tax clearance certificate or valid BEE certificate.
Section 50 (b)(ii) and (iii) state that the PPRA may not issue a FFC to any PP who does not comply with the prescribed standard of training and does not have the practical experience determined by the PPRA.
Section 48 (3) states that any person who contravenes or fails to comply with section 48 (1) is guilty of an offence.
Section 48 (4) states that any person who contravenes or fails to comply with section 48 (1) 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.
Section 56 (1) states that a PP is under no circumstances entitled to any remuneration in respect of arising from the performance of any act referred to in the definition of the PP’s, in sub paragraph (i), (ii), (iii) or (iv) of paragraph (a) in section 1 of the PPA, unless at the time of performance of the act, the PP has provided the conveyancer with a certified copy of his fidelity fund certificate.
Section 56 (5) states that a conveyancer may not pay any remuneration or other monies to a PP unless that PP has provided the conveyancer with a certified copy of his fidelity fund certificate.
Section 54 (1) states that every PP must open and keep one or more separate trust accounts which must contain a reference to this section.
Regulation 4 (Exemption from Trust Accounts) – a PP is exempted from keeping a trust account if that PP has never received any trust monies or no longer receives any trust monies and that PP submits to the PPRA an affidavit in which they undertake that they will not receive any trust monies.
Section 58 (a) and (b) state that a PP may not enter into any arrangement, formally or informally, whereby a consumer is obliged or encouraged to use a particular service provider including an Attorney to render any service or ancillary services in respect of any transaction of which that PP was the effective cause.
Regulation 37 to the PPA – states that the following wording must appear on all letterheads and marketing material pertaining to a PP “Holds a Fidelity Fund certificate issued by the Property Practitioners Regulatory Authority”.
The Regulation further states that in any agreement in connection with a property transaction to which the PP is a party, the agreement must contain the following clause “XXX (insert name) hereby warrants the validity of his Fidelity Fund certificate as at the date of the signature of this agreement”.
A Property Developer is a PP and must hold an FFC.
The Directors of the Developer must also be the holders of an FFC.
The employees of the Developer who sell or who market, promote or advertise any part of the development must also be the holders of an FFC.
A question is still left open by the PPA regarding Developers who develop properties to be sold as a single entity and whether they are required to hold an FFC.
A Developer may apply to be exempted from compliance with any specific provision of the PPA.
The Developer to obtain an FFC, will need to comply with the prescribed standard of training and the prescribed practical experience (which will need to be clarified by the PPRA) to obtain a FFC.
The Developer will need to be in possession of a valid BEE certificate to obtain a FFC. The PPA does not prescribe any BEE level.
The Developer will need to open and keep at least 1 (one) trust account, which can be used should the Developer wish to receive deposits from Purchasers.
A Developer who does not have a FFC must repay any amounts received as a result of the property transactions and a Conveyancer may not pay any remuneration or any other monies to Developer unless the Conveyancer has been provided with the Developer’s FFC.
A Developer may not enter into an arrangement with a service provider, i.e an Attorney, where the consumer is obliged or encouraged to use the particular service provider to provide his services in respect of the transaction, where the PP was the effective cause.
A Developer can be exempted from keeping a trust account.
Alan Levy Attorneys Notaries & Conveyancers offer Property Developers and Sellers expert advice and legal guidance on property law in line with South African legislation.
Remember, this article is a summary only and does not constitute legal advice, of any sort. For legal advise on how to handle your matter, please contact Alan Levy Attorneys.