Archives: General Interests & News Flashes

“We must not make a scarecrow of the law” (Shakespeare)

We live our lives beset by so many laws and regulations that even the most law-abiding of citizens will sooner or later be accused of some petty offence or other and then faced with the question “Do I fight this in court or do I just pay the fine and get on with it?”

Tread carefully here – paying a fine and getting it over and done with is one thing – burdening yourself with a criminal record for life is an entirely different kettle of fish. We discuss the expungement option, when you are at risk of acquiring a criminal record and when you aren’t, and the story of the grass seller who turned to the High Court for help after his admission of guilt fine came back to haunt him eight years later.

A criminal record, even for a minor offence from decades back, comes with very serious and lifetime consequences. It will hang around forever, just waiting to ambush you when you apply for a job, or a travel visa, or a firearm licence.

So acquiring a record inadvertently is the stuff of nightmares, and the question is whether you can land yourself in that position by paying an admission of guilt fine? The reality is that we are beset by so many laws and regulations covering every aspect of our lives that most of us have paid admission of guilt fines at one time or another. Usually it’s just to avoid having to defend ourselves in the unpredictability and delay of an over-burdened court system. Sometimes it’s the more serious matter of avoiding a stay in a police cell.

A remedy, but it’s not ideal

The remedy, once you do have a record, is to apply for “expungement” of the record to remove it from the CRC (SAPS’ Criminal Record Centre)’s database. Expungement is however only available to you after 10 years and for certain “minor offences” – plus your application will take a long time to process (“20 – 28 weeks” per SAPS). Note that some specified minor convictions fall away automatically after 10 years – ask for specific advice.

All in all, prevention is very definitely better than cure.

When are you at risk?

• You will acquire a criminal record if you are arrested, if the police open a docket and take fingerprints, and if you are thereafter convicted of a crime.
• Does that apply to admission of guilt fines? Firstly, with traffic offences find out what section of the Criminal Procedure Act (CPA) is involved. Minor offences – speeding, licence offences, illegal parking and the like are normally “Section 341/Schedule 3” offences, where there is no actual prosecution and therefore no criminal record to end up in the CRC.
• Other offences however will likely be dealt with as “Section 57/57A” offences. An admission of guilt in those cases lands you with a “deemed” conviction and sentence, and until recently, that deemed conviction and sentence could well have ended up in the CRC database. In practice you would probably still have been in the clear if you weren’t actually arrested and fingerprinted, but several years ago there was talk of convictions being captured with just a name and ID number. If you want to be sure, apply for a clearance certificate – see “Applying for a Police Clearance Certificate (PCC)” on the SAPS website.
• A “Section 56 Written Notice to Appear in Court” may also give you the option of paying an admission of guilt fine to avoid appearance in court – in which event section 57 would apply as above.
• The point though is that a recent High Court decision means that any admission of guilt fine – even a section 57/57A one and even after an arrest and fingerprinting – should not lumber you with a “permanent conviction”.

In other words, the new position is that while a court-imposed conviction and sentence will end up in the CRC, an admission of guilt fine should not.

Let’s illustrate with a look at the case of the roadside grass seller…

A grass seller’s R500 admission of guilt fine comes back to haunt him

• In 2010 a roadside seller of instant grass quarreled with another grass seller about use of a particular spot on the road. The other seller laid assault charges against him, alleging he slapped her twice and pushed her.
• Arrested, detained and fingerprinted, the accused paid a R500 admission of guilt fine when given the option to do so. Per standard procedure a magistrate then “examined” the documents and the accused’s “deemed” assault conviction and sentence were entered firstly into the court’s record books and then into the CRC database.
• The accused learned of his criminal record for the first time when in 2018 he applied to become an Uber driver (a police clearance certificate being an Uber requirement).
• He turned to the High Court to set aside his conviction and sentence on the basis that he thought signing the admission of guilt was his only way of obtaining release from custody and that his rights had not been explained to him. Effectively he denied the assault, and took the chance that the State might still decide to pursue the prosecution in court.
• The Court set aside our grass seller’s conviction and sentence, characterising this type of admission of guilt as “not a verdict” but rather “essentially an agreement between the State and the accused” intended only for “trivial offences”, and involving no consideration as to “whether the accused was in fact and in law guilty of the offence”.
• The Court: “A conviction and sentence following an entry into the admission of guilt record book by the clerk of the criminal court in the magistrates’ court is not a conviction whose record is permanent” nor “to be entered in the Criminal Record System”.

The bottom line

The Court found that this accused had been pressured into admitting guilt and ordered that the Minister of Police be served with a copy of its order with a view to taking advice from the Commissioner of Police in “devising policy to address the criticism that the SAPS use arrest and detention to force vulnerable members of society who fear being locked up, to admit guilt on petty crimes using arrest and the threat of continued detention.”

But even once such a new policy emerges, be careful here and have your lawyer advise you in the slightest doubt.

“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell” (Sir John Templeton, billionaire investor)

If you plan to buy a house before the property market starts to recover from its present doldrums, be aware of the risks you face if anyone is currently in the property.

A recent High Court decision illustrates the danger of your being unable to evict unwelcome occupiers who point-blank refuse to leave. We’ll analyse that decision, and the lessons to be learned from it, after summarising the two things that PIE (the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act) requires you to prove before a court will grant you an eviction order.

We’ll end off with some practical advice on how to avoid this sort of problem in the first place.

You are it seems in good company if you view times of depressed property prices and general uncertainty as a great buying opportunity.

Just be aware that if it is a house you are after, whether as an investment or to live in, you should do your homework if the property is (or might be) occupied. Generally speaking, buying a property with occupiers is fine if you know about them and have a binding deal in place with them (see the end of this article for more on that).

But, as a recent High Court decision illustrates, if you aren’t aware of occupiers and/or don’t have a proper agreement in place with them, you could find yourself unable to evict them even if you buy the property “free of lease”.

Before we discuss the case itself, it is important to know that to get an eviction order from a court, you need to prove in terms of PIE (the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act) both –

1. That the occupants are “unlawful occupiers” and
2. That it is “just and equitable” to grant such an order after considering all the relevant circumstances.

The Bo-Kaap flat, the sale in execution, and the occupiers

• A property investor bought a flat in a sectional title development on a sale in execution. As we shall see below, the history of the flat’s ownership, and its location in Cape Town’s historic Bo-Kaap area, were relevant to the outcome of this matter.
• The Sheriff of the High Court sold the flat for R375,000 “free of lease”, but also with “no warranty that the Purchaser shall be able to obtain personal and/or vacant occupation of the property or that the property is unoccupied and any proceedings to evict the occupier(s) shall be undertaken by the Purchaser at his/hers/its own cost and expense….”
• The people living in the flat refused to leave or to “legalise … their rights to the property”, and the investor applied to the Court for their eviction.
• The eviction order was refused firstly because the investor was unable to prove that the persons it was trying to evict were “unlawful occupiers” for lack of information as to –
  • Who the occupants of the flat actually were, with the result that “the court has scant knowledge of essential details of the occupiers of the property in circumstances where these are material to the exercise of the court’s discretion under the provisions of PIE”. Crucially, there was nothing before the court as to the ages or circumstances of the occupiers, so it was unable to consider “all the relevant circumstances including the rights and needs of the elderly, children, disabled persons and households headed by women”.
  • When and under what legal right the occupiers originally took occupation (lease, right of habitation, usufruct etc), when that right was terminated and under what circumstances. Note that timing is important here because once unlawful occupation has lasted for more than 6 months, the question of relocation to land supplied by the municipality or government becomes relevant.
  • Whether or not the occupants had any form of written or verbal lease. That’s important because of our law’s “huur gaat voor koop” principle – literally “lease goes before sale”, meaning that you are generally bound to honour an existing lease (there are a few exceptions – take specific advice).
• Secondly, the investor failed to convince the Court that it was “just and equitable” to grant the eviction.

Again, the lack of information as to the occupiers was relevant, and the Court’s comments on the particular facts of this matter are worth noting in full (our emphasis): “The residents of the area are, generally speaking, not wealthy and Bo-Kaap is home to many poor and working-class people. An eviction of the type sought in this matter, in which a group of related persons appear to occupy a family home that was acquired from the City of Cape Town some time ago, might well render them homeless or at the very least require them to relocate to one of the outlying suburbs that are now home to the many who fell foul of the Group Areas Act. If those circumstances obtain, a court would be required to think long and hard about the justice and equity of ordering people to vacate a dwelling, long occupied, which has been snapped up by a buyer distant to the neighbourhood for investment or development potential. Certainly, it is to be expected of such buyers that when they seek to move established families out of their homes, they do their homework properly and place all relevant facts before the court.”

Do your homework, and do it properly!

Investor or not, the Court’s warning to do your homework applies to you. Establish whether anyone is living in the house, exactly who they are, how long they have been there, and on what basis.

Bear in mind that because leases need not be in writing, you could find yourself battling occupiers who claim to be tenants under a verbal lease. Without a written record they could well claim to be entitled to pay minimal rent and to have many years left on their “verbal lease”.

So first prize will always be to reach a written, water-tight deal with any occupants before buying – ask your lawyer for help.

PART 5

This is the final installment in the series on the proposed legislation.

PROPERTY PRACTITIONERS AND CONSUMER PROTECTION

LIMITATION ON RELATIONSHIPS WITH OTHER SERVICE PROVIDERS

Property Practitioners are not entitled to enter into any arrangements, whether formal or informal, in terms of which a consumer is obliged or encouraged to use a particular service provider, including an attorney, to render any service in respect of any transaction of which that Property Practitioner was the effective cause. Contracts of this nature are now illegal and the Minister is also entitled, by way of regulation, to prohibit other relationships which might harm the consumer.

Once again, the sanction for breaching this rule is that the Property Practitioner is not entitled to be paid their commission, and the other party, possibly the conveyancing attorney, will not be entitled to charge their fee. Once again, even if the commission/fees have been paid, the consumer would be entitled to claim repayment, and if the Property Practitioner or other party did not pay within 30 days, they would be guilty of an offence in terms of the Act.

INSOLVENCY/LIQUIDATION OF PROPERTY PRACTITIONER

If a Property Practitioner commits an act of insolvency, or is insolvent, or is placed under liquidation, whether provisional or final, they are immediately disqualified from holding a FFC. It seems that this disqualification arises before a final order of sequestration/liquidation has been granted. It could also arise before an application for sequestration/liquidation has been initiated. This is poor drafting as the circumstances under which this disqualification will arise are not set out clearly enough. There will be substantial grey areas.

This might also mean that Property Practitioners who are sequestrated/liquidated will be deprived of their claims for unpaid commission, as they will not hold a Fidelity Fund Certificate at the time that the commission is paid. This is not fair.

CODE OF CONDUCT AND SANCTIONABLE CONDUCT

The new Act provides for a Code of Conduct which I assume will be similar to the current Code. A breach of the Code is now an offence in terms of the Act.

Certain offences that were contained in the current Code have now been elevated to form part of the Act. You are not entitled to receive payment from two persons who are involved in the same transaction, whose interests are not in all material respects identical, unless these parties agree to this in writing. What this means is that if you want to be paid commission from both the seller and the buyer, they must both agree to this in writing.

The Act also makes it an offence if you fail to give a full and proper explanation, in writing, of any act performed as a Property Practitioner, within 30 days of being requested to do so by the PPRA. Likewise, if the PPRA ask for information which they need to exercise their powers under the Act, you must provide this information within the period that the PPRA stipulate, or you will be guilty of an offence.

It is also an offence if you fail to inform the PPRA within 14 days of a change in your contact details; or if you discriminate against anybody.

If you are found guilty of an offence, the PPRA can withdraw your FFC, you can be fined, or you can be reprimanded, and your transgressions noted on their website.

The fact that you are being prosecuted on a criminal charge is not a bar to the PPRA acting against you in terms of the Act. It would seem therefore that the defence of “double jeopardy” will not apply. I doubt that this is constitutionally sound.

A person convicted of an offence in terms of this Act will be liable to a fine or to imprisonment for a period not exceeding 10 years. The sentences could therefore be harsh.

CANDIDATE PROPERTY PRACTITIONERS

Candidate Property Practitioners are not entitled to draft or complete any document or to draft any clause in a mandate, a deed of sale or a lease. A Property Practitioner who allows this to happen will not be entitled to be paid for their services. This is regardless of whether or not the Property Practitioner was aware of the contravention at the time.

CERTIFICATES OF COMPLIANCE

The Act attempts to makes it clear that a Property Practitioner is not entitled to interfere with the contractor who will be issuing the electrical, beetle or water certificate, or receive or offer any incentives related to this process. Once again, this section is very poorly drafted, and the evil which the act is intending to prevent is already dealt with in the section which prohibits unhealthy relationships with other service providers.

CONSUMER PROTECTION

The defects disclosure form is now going to become law. A Property Practitioner will not be entitled to accept a mandate for sale or lease, unless the owner of the property has furnished the signed mandatory disclosure form. As yet, the mandatory disclosure form has not been published, but I am assuming it will be something along the lines of the form published by EAAB.

This form will also have to be signed by the purchaser/tenant and attached to the contract. In the event that this is not done, it will be deemed that the owner of the property has not disclosed any defects or deficiencies in the property to the purchaser/tenant.

A Property Practitioner who does not comply with this requirement will be guilty of an offence and may be held liable by an affected consumer.

The Act also stipulates that agreements of sale, agreements of lease and the mandatory disclosure form must be drafted at the cost of the developer or the seller. The days when you are entitled to charge a tenant for a lease therefore seem to be coming to an end. But once again the drafting is confusing. Why is a developer included in this section, and why is a landlord not included? The PPRA are however obliged to publish updated versions of guideline agreements on their website and these should be available for free.

The PPRA is obliged to conduct campaigns to educate and inform the general public of their rights in respect of property transactions; and Property Practitioners of their duties and obligations.

This section ends with a short sentence stating that a Property Practitioner owes a buyer and a seller “a duty of care”. The duty of care is a concept taken from our law of delict. Accordingly, if a Property Practitioner fails to look after the interests of both the buyer and the seller, and the buyer or the seller suffer damages as a result of this, the Property Practitioner can be sued. If this was the intention of the Act, I cannot understand why this duty of care was not expanded to include a duty of care to landlords and tenants also. It is also not clear if negligence will be a requirement to create liability on the part of the Property Practitioner for breaching this duty. The section also does not recognize that an agent owes a primary duty to his or her client, and a subsidiary duty to others involved in the transaction (as stated in the current Code of Conduct). Once again, I think this is poor drafting.

CONCLUSION

We must remember that the Estate Agency Affairs Act was passed in 1976 and is now 42 years old. It was therefore in need of an update. The law we are going to be given is however badly drafted and will give rise to many disputes that will end up in the courts. From my point of view, the most important aspects of this new Act are the following:

The expanded definition of Property Practitioner, which will now bring a lot of other people under the umbrella of the PPRA. Regrettably, the Act seems to have been drafted without regard for these additional players. The Act is therefore going to be difficult to apply to these new Property Practitioners and it will create uncertainty.

The sections dealing with the transformation of the industry. In 2013 black estate agents, made up a mere 8% of the industry and the average age of an estate agent was estimated at about 57. The industry was not transforming on its own. Now the PPRA can use money from the Fidelity Fund to drive this process. Only time will tell whether the new Act will have the desired effects.

The additional powers that the PPRA will now have to enforce compliance with the law. This might well result in some Property Practitioners having sleepless nights if there is a real threat that their premises will be raided and their non-compliance exposed.

The additional sections relating to the Fidelity Fund. The money in the fund can now be used for additional purposes, and the Minister will have the final say over managing the fund. There’s a lot of money in the fund and the risk that the money might be misappropriated is now greater.

The new law relating to FFC’s. It appears that FFC’s will now be issued for three years and if the PPRA drags its feet in issuing the FFC, it will be deemed to have been issued. This is a plus. On the minus side, however, agencies who did not hold FFC’s at the time of the conclusion of the sale will now be liable to repay commissions which they had already received.

The maximum sentence for breaching the Act has been increased to a 10 year term of imprisonment.

The defects disclosure form must now be completed at time of mandate for both sales and leases.

The cost of drafting an agreement of sale or an agreement of lease must be for the developer/seller’s account.

The Act makes it clear that Property Practitioners owe a duty of care to both a buyer and a seller.

The Act still has to pass through the National Council of Provinces before it can be signed into law by the President. I think the form of the
Act is now settled and that we will soon have to get used to operating under its provisions. As soon as this happens, we will let you know.

Deon Welz
Miltons Matsemela
January 2019

In order to transfer or cancel any real right that is registered in the deeds office one has to lodge the original holding deed, such as a title deed or mortgage bond. It frequently however happens that these have been lost or destroyed and then the person in whose name the deed was issued, simply signs an affidavit (signed in front of a commissioner of oath) stating that the document has been lost etc; we lodge this at the deeds office with a copy of the deed (obtained from the deeds office which has digital copies), and they then let us have a certified copy, which then replaces the original. Clean and simple.

Now it is about to change! As from 25 February 2019, the affidavit will have to be signed in front of a Notary Public. Not all conveyancers are Notaries and not all offices (especially branch offices) of law firms have Notaries on site, so this is sure to create a slow down as appointments will now have to be scheduled at different offices. Secondly, notice of the intention to apply for a certified copy must be placed in the Government Gazette, and the application must then lie for inspection at the affected deeds office for 2 weeks so that any affected person may object, before one may lodge the application at the deeds office.

Heaven alone knows why anyone would want to object. The changes do not tell us what were to happen if someone were to object or how they are to object and how it must then be dealt with! And it is not uncommon for the Government printers to forget to place an advert once you have booked and paid for it, and they only appear on Fridays – so then you may lose yet another week.

Sadly, this change is now going to cause a delay in transfers, and there will be an additional cost to publish this in the Gazette.

With respect to the authors of this new piece of legislation, this is a really unnecessary change because the existing procedure has worked perfectly well to date.

Robert Krautkramer
Miltons Matsemela Inc
30 January 2019

THE PROPERTY PRACTITIONERS FIDELITY FUND

In just the same way as the Property Practitioners Regulatory Authority will take over from the Estate Agency Affairs Board, the Estate Agents Fidelity Fund will now become the Property Practitioners Fidelity Fund.

All of the income of the PPRA will be paid into the Fidelity Fund. This will include all fees, investment income, any claims, any insurance payouts and all interest.

THE PURPOSE OF THE FUND

The main purpose of the Fund is to reimburse people who suffer the loss as a result of theft of trust money by a Property Practitioner who was holding a Fidelity Fund Certificate at the time of the theft, and those people who suffer loss as a result of a Property Practitioner not keeping a trust account or not depositing trust money into the trust account.

If a person has a claim against the Fidelity Fund, they must give notice of the claim within three years and they must have responded to any written request that the Fidelity Fund might make for any such proof, within this three-year period. If these requirements are not met, the claim against the Fidelity Fund will just lapse. If the Fidelity Fund repudiates the claim, the claim will prescribe (become extinguished as a result of the passing of time) unless the claimant issues a court summons within a period of 3 years from the date of the repudiation.

CONTROL AND MANAGEMENT OF THE FUND

The PPRA will now have control over the management and administration of the Fidelity Fund. The PPRA will also have the power, with the approval of the Minister, to outsource the management and administration of the Fund to any portfolio management company or financial institution. This is where the control of the Fidelity Fund is taken from the industry and where the Minister is given the ultimate say over who looks after the money. Previously this discretion rested solely with the EAAB. Now it rests with their political master. I doubt whether this additional political control will be good for the Fund.

To give you an idea of the amount of money in the Fidelity Fund, it currently has assets of just over R610 000 000, R550 000 000 of which is in the form of investments. In the 2017 tax year it spent R6 700 000 on “Transformation Activities” and R7 250 000 on “Consumer Education and Awareness”. Its’ administration fees ran to more than R52 000 000. These amounts are sure to grow. The contract to administer these funds will obviously be very lucrative.

The income from contributions for FFC’s was only R1 475 000. Now that so many more players will require FFC’s to operate, this income will increase.

CLAIMS AGAINST THE FUND

Before anybody can lodge a claim against the Fidelity Fund they must have laid criminal charges against the Property Practitioner who was guilty of the offence. Previously, the person making the claim had to have exhausted all legal rights and remedies to recover the money from the estate agent. I prefer this new approach as often claimants were unable to afford the cost of legal proceedings which would generally not have resulted in the recovery of anything from the fraudulent estate agent in any event. Now all a claimant must do is lay criminal charges.

This should substantially speed up the recovery of losses suffered by the public from the Fidelity Fund. This will however not be the case if the Fund decide to wait until the criminal prosecution has been finalised before conducting their own inquiry into the claim.

PAYMENTS FROM THE FUND

The Fidelity Fund is mandated to pay for the following:

• All claims established against the Fund. The Minister does however have the power to cap the amount payable in respect of any category of claims, to protect the Fidelity Fund against insolvency.
• Contributions to the costs incurred by a claimant (in the discretion of the PPRA);
• All the Fidelity Fund’s legal, accounting and other expenses;
• All insurance premiums for indemnity insurance – in this regard, the PPRA has the authority to arrange a group insurance scheme to cover Property Practitioners against claims made by the public on the grounds of malpractice, up to an amount determined by the PPRA. In this way the Fidelity Fund will be able to provide wider insurance cover for Property Practitioners for their benefit and for the benefit of consumers. This is to be welcomed;
• All costs for the management, control and administration of the Fidelity Fund;

The Fidelity Fund may also pay out grants for these purposes:

• Research into fields of activity relevant to Property Practitioners;
• To maintain and promote standards of conduct and education and training;
• Transformation of the property sector.
• To ensure the continued operation of organisations similar to the Institute of Estate Agents, or REBOSA;
• For the purposes of advertising and promoting public awareness in the industry and in consumer rights relating to immovable property.

FEES PAYABLE TO THE FUND

As expected, all Property Practitioners will need to pay fees to the Fidelity Fund for their Fidelity Fund Certificates (FFC’s). The Fidelity Fund is now also entitled to collect money from Property Practitioners under another Section of the Act. This is any amount that the Minister may decide, in consultation with the Minister of Finance and the board of the PPRA. This looks a little ominous.

COOPERATION BY CLAIMANTS

Anybody who lodges a claim against the Fidelity Fund has to co-operate to enable the claim to be properly investigated. This cooperation extends to giving assistance to SAPS and the prosecuting authority and to the PPRA to recover payments made from the guilty party. If you fail to cooperate, the Fidelity Fund can withhold payment of your compensation.

If the Fidelity Fund deny your claim, and you feel that you are entitled to be compensated by the Fund, you have a period of three years to issue summons against the Fund to enforce payment.

No loss of support claims may be made against the Fund.

A person can also not claim against the Fidelity Fund in respect of damages suffered as a result of the criminal conduct of a person’s business partner, co-director of a company, co-member of a close corporation, co-trustee, life partner or employee. Compensation payable from the fund is therefore limited to reimburse members of the public who have suffered loss as a result of the actions of a Property Practitioner.

This ends the commentary on the sections dealing with the Fidelity Fund. In the next part of this series, which will be published later this week, I will deal with Property Practitioners and Fidelity Fund Certificates, a subject that will be far more interesting and relevant to the day to day operations of Property Practioners.

Deon Welz
Miltons Matsemela Inc
18 January 2019

TRANSFORMATION OF THE PROPERTY SECTOR

You might recall that the property sector has a Transformation Charter which was finalised in 2017.  In chapter 4 of the new Act it is confirmed that this Transformation Charter applies to all Property Practitioners. When procuring services from Property Practitioners, all organs of state are obliged to use the services of practitioners who comply with broad-based black economic empowerment and employment equity legislation and policies.

The Property Practitioners Regulatory Authority (PPRA) is also obliged to assess the state of transformation within the industry and take steps to speed up transformation.

To fund these efforts, the PPRA has to create a Property Sector Transformation Fund.  The money in this fund can be used in numerous ways to promote the interests of the historically disadvantaged, including providing for training and development.

The Act also establishes the Property Sector Research Centre.  The purpose of this centre is to increase research, promote innovation, develop human potential and generate new knowledge.  The Research Centre is intended to be the central repository of expert knowledge in the property sector.  It is also intended to “support the realisation of South Africa’s transformation into a knowledge-based economy in which the generation of knowledge translates into socio-economic benefits.”  It must also promote consumer awareness and education.

I’m not sure how to interpret this part of the Act.  The ideas seem noble, but whether the PPRA and the Property Sector Research Centre are ever going to be able to do anything to achieve these lofty ideals is yet to be seen.  I fear that this part of the Act might turn out to be a platitude, with very little positive effect.

COMPLIANCE AND ENFORCEMENT

The Act will be policed by inspectors who will have wide-ranging powers of search and seizure.  They will have to identify themselves with certificates of appointment or identification cards.

Inspectors will be entitled to enter business premises (not private residences) without a search warrant and demand access to the business records or other documents.  If an inspector wishes to have access to a private residence from which a business is being conducted, the inspector must give advance notice.

The inspectors’ powers are even greater with a search warrant.

Inspectors are entitled to confiscate and remove records or data which might be used in legal proceedings against the Property Practitioner.

The Act goes into substantial detail as regards the procedures that need to be followed in obtaining and executing a search warrant.  The inspector is entitled to rely on the assistance of the South African Police Services, who can use force to overcome resistance, or to gain entry.

It is intended that the Minister will publish regulations which will distinguish between contraventions of the Act that are of a minor nature and contraventions which are of a substantial nature.  Minor offences can be dealt with by using compliance notices and fines.  There would be no criminal prosecution for these minor contraventions.

The Minister must also set the limits of fines that will have to be paid for contraventions of the Act.  All fines will be paid to the PPRA.

The PPRA will have the authority to utilise any part of the fine to pay compensation to any person who has suffered loss as a result of the conduct of the Property Practitioner.

THE PPRA’S DUTY TO ADJUDICATE ON DISPUTES

The PPRA is also obliged to deal with any complaints that might be lodged against Property Practitioners.  The scope of the PPRA is however limited to complaints relating to financing, marketing, management, letting, hiring, sale and purchase of property.  Once again, it seems as if the business brokers are excluded from this part of the Act.

The Act sets out time limits for the procedures which the PPRA has to follow once it has received a complaint.  Firstly, it has to acknowledge receipt within 7 days and issue a case number.

The PPRA can then either refer the dispute to mediation or adjudication.  If the dispute goes to mediation, the PPRA must appoint a mediator within 7 days and the mediator has a further 7 days to set a date for the mediation, which must be within a 30 day period.

The Act specifically makes provision for the PPRA to deal with disputes between Property Practitioners, on a “cost recovery” basis. It therefore seems that Property Practitioners will have to pay to have their internal disputes resolved in this forum.

For matters where a Property Practitioner fails to comply with a compliance notice, or fails to pay a fine, or where mediation has failed, or where the complaint/contravention is of a serious nature, the PPRA must have the matter adjudicated.

The adjudication will take place before an independent, legally qualified person who may also appoint independent assessors for assistance.

Once appointed, the adjudicator will have 14 days to set the matter down for hearing and this hearing must take place within 60 days.  While the Act specifies that the PPRA must appoint a mediator within 7 days, the Act is silent on how long the PPRA has to appoint an adjudicator.

The decision of the adjudicator will have the same force as a judgement of the Magistrate’s Court.  The adjudicator also has the authority to order the PPRA to pay up to 80% of any fine to the complainant as compensation.

The Act makes provision for an appeal process if any of the parties disagree with the decision of the adjudicator.  The adjudication appeal committee will consist of three independent suitably qualified persons who will have 14 days to set the matter down for hearing.  This hearing must take place within 60 days.

While the drafting of these sections dealing with non-compliance and disputes could have been better, the Act does place a premium on the speedy resolution of matters and this can only be good for the industry.

FINANCES

The Act sets out where the PPRA will be getting its funding from.  This money will come from Parliament, from fees paid by Property Practitioners, from interest generated from the investment of surplus funds, and any other source.

The Act envisages that money or property might be donated or bequeathed to the PPRA.  This seems highly unlikely.

The Act also gives the PPRA the authority to recover costs that it has expended in carrying out inspections, investigations and disciplinary proceedings, or in carrying out audits on trust accounts from the Property Practitioner in default.

The financial year end of the PPRA will be 31 March of each year.  It is strange that the financial year end is not going to coincide with the national tax year end.

This ends Part 2 of this commentary on the Property Practitioners Bill.  In Part 3, I will be dealing with the Fidelity Fund and Fidelity Fund Certificates.

Deon Welz
Miltons Matsemela
January 2019

As mentioned in my last Newsflash of 2018, this Bill is about to become the law that will replace the Estate Agency Affairs Act, that has regulated the profession since 1976. The Bill has been passed by Parliament and now only has to pass through the National Council of Provinces before it is signed into law by our President. I see no obvious obstacles that will prevent this from taking place before our elections in May. The new Act will substantially change the profession.

The new Act is a substantial piece of legislation, comprising 38 pages and 77 sections. It deals with all aspects of the profession. It is therefore impossible to give it proper coverage in a single Newsflash.

My intention is therefore to break the Act up into sections and to deal with each part in a separate Newsflash. This is the start of our journey.

PART 1

STATED OBJECTIVES OF THE ACT

The stated objectives of the Act go far beyond the old legislation and are ambitious to say the least. They are stated in Section 3 and can be summarised as follows:

• To regulate “Property Practitioners” – this term is defined later on;
• To replace the EAAB with another body, the Property Practitioners Regulatory Authority, which will have wider jurisdiction over more players in the property industry;
• To better protect consumers;
• To provide for internal dispute resolution in the property market;
• To provide for education and training;
• To regulate licensing of Property Practitioners;
• To create a just and equitable legal framework for the industry;
• To transform the industry by promoting the interests of historically disadvantaged individuals and small and medium sized enterprises;
• To create a fund for transformation;
• To promote home ownership in the affordable and secondary housing market;

INTERPRETATION/DEFINITIONS

The Act starts off with its usual flowery introduction and moves swiftly on to the section which defines terms which are used in the legislation. The definitions make it clear that we will still be dealing with issues relating to “candidate property practitioners”, a “code of conduct”, the Property Practitioners Fidelity Fund, (previously the Estate Agents Fidelity Fund), Fidelity Fund Certificates and Registration Certificates.

More notable however is the definition of a “Property Practitioner”. It is with this definition that the scope of the Act is widened to include a whole host of other people in addition to estate agents. The definition extends over one and a half pages and includes all of those who were previously regulated under the old act.

The expanded definition of Property Practitioner means that commercial brokers who sell businesses will also be included under the umbrella of this Act (although the fact that the Act applies to them is soon forgotten by the draftsman), so will mortgage bond brokers and people who provide bridging finance (unless they work for registered financial institutions).

Also included are property valuers, people doing home inspections for purchasers before a sale, property managers, agents involved in the selling of timeshare and fractional ownership, and anyone else who facilitates or acts as an intermediary with the primary purpose of bringing about a sale of a property or a business.

The definition goes on to include people who manage the business of a Property Practitioner. This will obviously include office managers. It might also include personal assistants.

The definition also specifically includes digital portals that publicly exhibit properties (or businesses) for sale or for rent using electronic means. The definition will therefore bring Private Property and Property 24 under the ambit of the Act. It also includes companies that receive rentals on behalf of others. This might include PayProp.

Also included are employees of Attorneys who act as estate agents, even though they are also covered under the Attorneys Fidelity Fund.

Finally the definition also purports to include persons who were Property Practitioners at the time when they committed an offence under the Act. I believe the purpose of this is to enable a person to be sanctioned under the Act, even after they have left the industry.

The new Act also makes provision for specific exclusions from the definition of Property Practitioner. These are:

• A person who does not carry out any of these functions “in the ordinary course of business”;
• A natural person who sells their own property, even if it is in the ordinary course of business. It is notable that the exemption does not specifically extend to the sale of a business or the leasing of a property by the owner thereof, although this might be covered in the first category;
• Attorneys and Candidate Attorneys and the Sheriffs of the Court.

APPLICATION OF THE ACT

Section 2 of the Act, which is entitled “Application of Act” sums up quite succinctly the broad application of this new law, it reads as follows:

• This Act applies to the marketing, promotion, managing, sale, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.

But what about businesses? Perhaps the drafters only wanted the new Act to apply to business brokers when the business included rights in immovable property, but they have not said this.

By casting its net so wide the new Act will have the potential to bring in more money to the new regulating Board of Authority that will take over from the EAAB. With all these new people to regulate and police however, I can see that this organisation is going to struggle to act efficiently and to meet its objectives.

THE ADMINISTRATION OF THE ACT

The Act will be implemented through a body called the Property Practitioners Regulatory Authority. This body will replace the Estate Agency Affairs Board. The duty of the PPRA will be to:

• regulate the conduct of property practitioners and ensure that they comply with the Act;
• protect and educate consumers;
• provide for education, training and development of property practitioners; and
• champion the transformation of the property sector.

The PPRA will be overseen by a board of between nine and twelve non-executive members and the CEO. This board must have a combination of financial and legal experience, and experience as property practitioners. There must also be experience in rural and land reform and consumer interests. With all the skills required. The possibility exists that the board will be dominated by people with little experience in the estate agency field.

The CEO will be responsible for the day-to-day running of the PPRA. This person will be appointed for five years at a time and can serve two terms. The CEO will hire a staff complement to enable the PPRA to carry out its functions.

In the next part of this series, which will be published next week, I will deal with the transformation of the property sector, compliance and enforcement issues, the PPRA’s duty to adjudicate on disputes and the Fidelity Fund.

Deon Welz
Miltons Matsemela Inc
8 January 2019