Managing Agents and the Property Practitioners Act, 2019

In this article we will examine the following:

• What Managing Agents who are registered as Estate Agents need to look out for in the new Property Practitioners Act, 2019 (PPA)
• What Managing Agents who are not registered as Estate Agents need to do in terms of the PPA
• Exactly who at a Managing Agent’s office needs to hold a Fidelity Fund Certificate (FFC) and be a Property Practitioner (PP)
• Some key differences between the Estate Agency Affairs Act, 1976 (EAAA) and the PPA

The new dispensation of the PPA

• The PPA will replace the EAAA, 1976 in its entirety. 
• Section 76 of the PPA states that the EAAA Act is repealed.
• Section 75(6) of the PPA states that all regulations made in terms of the EAAA remains in full force and effect as if they have been made in terms of the PPA.
• The PPA was published on 3 October 2019 and will come into operation on a day to be proclaimed by the President.
• The draft PPA regulations were published for public comment in March 2020.

What do Managing Agents have to watch out for in the new PPA

• The PPA no longer speaks of an Estate Agent but rather of a Property Practitioner (PP).  The definition of a Property Practitioner has been amended to include a natural/juristic person who for the acquisition of gain of the instructions of another person, manages property. (Section 1(a)(i) and (c)).
• Application of the PPA – Section 2 of the PPA states that the PPA applies to the managing of immovable property and to any rights, obligations, interests, duties or powers associated with or relevant to such property.
• Objects of the PPA – Section 3(h) provides that an object of the PPA is to provide for a just and equitable legal framework for the managing of property.
• Exemptions from the PPA – Section 4(1)(2) provides 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 Property Practitioners (PP’s) may be exempted from keeping Trust Accounts.
• Powers of Inspectors – Section 25(1)(4) provides that Inspectors may at reasonable times and without prior notice, conduct inspections on PP’s to determine whether the provisions of the PPA are being complied with and may without a search warrant enter and inspect business premises of PP’s.  If the PP conducts his business at a private residence, the Inspector would require a search warrant, which will be issued by a Judge, if it appears that there are reasonable grounds for suspecting a contravention of the PPA.
• Lodging of Complaints – Section 28 provides that any person may in the prescribed form lodge a complaint with the PPRA against a PP in respect of the management of property. 
• Fees payable by PP’s – Section 41 provides that a PP must annually pay to the PPRA a prescribed application fee for an FFC in accordance with Section 47 of the PPA.
• Application for an FFC – Section 47 provides that every PP must every 3 years apply to the PPRA for an FFC.  The PPRA on receipt of the application, if the Applicant meets the requirements of the PPA, will issue to the Applicant a FFC valid until 31 December of the year to which such application relates.
• Prohibition of rendering services without a FFC – Section 48(1) states that no person may act as a PP unless he has been issued with a 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 PP is a company, every Director of such company must be issued with an FFC.
• Section 48(3) states that any person who contravenes or fails to comply with the above is guilty of an offense and must also 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 and that any person who fails to comply with such a request is also guilty of an offense.
• Disqualification from the issue of an FFC – Section 50 provides that the PPRA may not issue an FFC to any person who is not in possession of a valid tax clearance certificate or valid BEE certificate (no minimum BEE level is currently prescribed).
• Section 50(b)(ii) and (iii) states that the PPRA may not issue an 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.
• Mandatory display of FFC – Section 53 provides that a holder of an FFC must prominently display the FFC in every place of their business and ensure that the prescribed sentence regarding their FFC is reproduced on their letterheads and marketing material as well as in any agreements relating to property transactions entered into by the PP and that failure to comply with such provisions is an offense.
• Trust Accounts – 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) states that 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.
• PP’s not entitled to remuneration in certain circumstances – Section 56(1) states that a PP is under no circumstances entitled to any remuneration in respect of or arising from the performance of any act referred to in the definition of 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 have provided the Conveyancer with a certified copy of his FFC.  Section 56(5) states that a Conveyancer may not pay any remuneration to a PP unless that PP has provided the Conveyancer with a certified copy of his FFC.
• Limitation on relationships with other property market service providers – Section 58(a) and (b) states 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 service in respect of any transaction of which that PP was the effective cause.
• Wording on letterheads and in agreements – 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.”

The following conclusions are drawn for Managing Agents

• A Managing Agent is a PP and must hold an FFC
• The Directors of the Managing Agency must also be the holders of an FFC.
• The employees of the Managing Agency who manage property must also be the holders of an FFC.
• A Managing Agent may apply to be exempted from compliance with any specific provision of the PPA.
• A Managing Agent to obtain an FFC, would need to comply with the prescribed standard of training and the prescribed practical experience (which will need to be clarified by the PPA) to obtain an FFC.
• The Managing Agency will need to be in possession of a valid BEE certificate to obtain an FFC.  The PPA does not prescribe any BEE level.  
• The Managing Agency will need to open and keep at least 1 Trust account.  Application for an exemption to hold a Trust account may be made to the PPRA.
• A Managing Agency who does not have an FFC must repay all amounts as a result of property transactions. 
• A Managing Agency may not enter into an agreement with a service provider, i.e., 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.

Managing Agents who are not registered as Estate Agents, what do they need to do in terms of the PPA?

With the advent of the PPA, Managing Agents who are not registered as Estate Agents have some important questions to ask themselves.  

Certain of these Managing Agents are of the view that they are not classified as Estate Agents in terms of the EAAA and neither as PP’s in terms of the PPA and that they therefore need not hold a FFC to carry out their services as a Managing Agent.

The legislature, already in 1981, amended the definition of an Estate Agent and included provision detailing that a Managing Agent who collects or receives money payable by any person to or on behalf of a Body Corporate in respect of a Sectional Title unit, is classified as an Estate Agent.  In the Fairbrass case, the SCA in 1999 ruled that a Managing Agent acting for a Body Corporate in collecting money due to the Body Corporate is subject to the jurisdiction of the EAAA.   However, these Managing Agents who allege that they are not Estate Agents nor PP’s make the argument that they do not manage property as envisaged by the PPA but rather that they do is to perform specified financial, secretarial, administrative and other management services to a Body Corporate (or a Home Owners Association), which is the scope of their services as provided in Prescribed Management Rule 28(5) to the Sectional Titles Schemes Management Act, 2011.  

Whether you are a Managing Agent sitting on either side of the fence, most Managing Agents would agree that the PPA should have gone further in governing Managing Agents of Community Schemes as a separate profession to those of sales and letting agents.  If the PPA really intended to include Managing Agents of Community Schemes as PP’s, the PPA could have merely included in the definition of a PP, a Managing Agent as defined in the Community Schemes Ombud Service Act, 2011.  This Act which we refer to as the CSOS Act defines a Managing Agent as any person who provides management services to a Community Scheme for reward.  No mention is made of managing an immovable property.

We know already that the STSMA allows Body Corporates to hold a bank account in their name and it is not necessary for these Managing Agents to have a Trust account in terms of the EAAA as the Body Corporate can hold its own bank account.

It will remain to be seen, if challenged, how the courts would interpret whether a Managing Agent of a Community Scheme is indeed a PP or not.  All leanings are that the legislature intended to include Managing Agents but failed to expand on this efficiently in the PPA.  Until then, Managing Agents who are not registered as PP’s have a dilemma on their shoulders.  Preferably, such Managing Agents should begin the process of regulating themselves as PP’s but there is still an argument to be made by such Managing Agents that they are not PP’s and need not hold an FFC.

Who at a Managing Agent’s office needs to hold a Fidelity Fund Certificate and be a Property Practitioner?

The juristic person under which the Managing Agency carries on business must be the holder of an FFC.

Further, the Directors or members of the juristic person of the Managing Agency also need to be the holders of an FFC (Section 48(2) PPA).

Any other person who is employed by a PP and performs on such PP’s behalf any act referred to in the definition of a PP in terms of Section 1(a)(i), (ii), (iii) and (iv), which includes managing a property.

Some key differences between the Estate Agency Affairs Act (EAAA) and the Property Practitioners Act (PPA)

The PPA includes in the definition of a PP, while the EAAA doesn’t in the definition of an Estate Agent, a person who, for remuneration, manages a property on behalf of another.  Interestingly, the PPA does not carry over the 1981 amendment of the EAAA that a party who collects or receives money payable to a Body Corporate, is an Estate Agent.

The PPA in Section 4 provides a mechanism whereby any person can apply to the PPRA for exemption from compliance with a specific provision from the PPA, whereas the EAAA did not include such a mechanism and section.

The PPA in Chapter 5, headed Compliance and Enforcement, provides for an extensive inspection, search and seizure mechanisms by Inspectors, with or without search warrants, whereas the EAAA did not provide for such mechanisms.

The PPA in Section 48 makes it an offense for a person to act as a PP without a FFC whereas the EAAA did not provide for such actions being an offense.

The PPA introduces the requirement of a valid BEE certificate before issuing of a FFC whereas the EAAA did not refer to such requirement.

The PPA refers to mandatory requirements for a PP to display its FFC at its offices and on any letterheads and marketing material as well as to have the mandatory sentence appearing in its agreements relating to property transactions, where the EAAA did not contain such requirements.

The PPA in Section 23 allows a PP to apply to the PPRA to be exempted from keeping a Trust account where the EAAA did not contain such a provision.

Section 48 of the PPA requires a PP to repay any amount received in respect of a property transaction, while the PP was not in possession of a FFC whereas the EAAA does not include such a provision.

Alan Levy Attorneys, Notaries and Conveyancers

Experts in property law and community scheme law offer Property Practitioners expert advice and legal guidance on property law and community scheme 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 advice on how to handle your matter, please contact Alan Levy Attorneys.