Be aware of changes under new Property Act
Doubts remain whether the newly signed-off Property Practitioners Act will further or hinder the process of transforming the property sector, but industry leaders highlight more aspects that agents and consumers should be aware of.
The Property Practitioners Act was recently signed into law by the President - a piece of legislation that is hoped will help ease the process of transforming the country’s property sector.
While transformation of the industry is broadly welcomed as most necessary, many in the industry have concerns that in its current form the Act might do just the opposite.
With 49 years of experience in the property sector behind him, Lew Geffen, chairman of Lew Geffen Sotheby’s International, has no doubt that additional regulations will repel people instead of attracting them. In former years it was precisely the ease with which the industry could be entered that was attractive to new entrants but that has since changed.
“There has been a steady decline in numbers in the real estate industry because of over-regulation. This has inhibited the ability to earn money immediately because of all the hoops one has to jump through which is a minimum process of one year as an intern agent whose ability to earn in the first year or two is severely stunted. Therefore, the high-end divorcee of yesteryear is not being attracted whether you are black, red, pink or white,” says Geffen.
Samuel Seeff, chairman of the Seeff Property Group, says while welcoming the new Act as the old Estate Agency Affairs Act of 1976 needed replacement, there are reservations as there are still a lot of uncertainty on how the Act will promote transformation.
“Attracting and retaining people of colour has been a challenge for the industry and as it stands currently, we are not sure the Act provides any assistance or incentives in that regard,” says Seeff.
Greater protection for consumers
Clarity on how the new Act will be enacted will only become clear once the regulations has been finalised. These must be drafted by the Property Practitioners Regulatory Authority which will replace the current Estate Agency Affairs Board (EAAB). While waiting for the regulations to be drafted and published, Berry Everitt, CEO of Chas Everitt International property group, says there are more aspects of the new Act that needs to be highlighted, specifically the changes to be made towards greater protection for the consumer.
Although the Act will not come into effect until the process to finalise new regulations attached to the Property Practitioners Act have been completed, the industry and the public needs to be aware of these changes says Everitt. He says their company has already made certain changes to its documentation and methods of operation to comply with the Act, especially as it applies to increased consumer protection.
Everitt highlights the following:
- Property practitioners will not be issued a fidelity fund certificate (FFC) unless they have a valid current Tax Clearance Certificate from SARS
- Conveyancers will not be allowed to pay out commission to any property practitioner who does not have a valid, current FFC. “This will do an enormous amount to get rid of illegal practitioners,” says Everitt.
- Property practitioners will not be allowed to enter into any relationships that encourage a consumer to use certain service providers, such as certain attorneys, banks, originators, electricians, plumbers or building contractors.
- Property practitioners will not be allowed to accept a mandate to market a property without a mandatory defect disclosure form completed and signed by the seller. This form will also form part of the sale agreement - and if it is not, the buyer will be able to hold the practitioner (not the seller) liable for any defects discovered after the transaction has gone through.
Property practitioners also need to take note that under the new Act they will invalidate their current FFC if they leave the industry for a while or change agencies and they will have to apply for a new one. Fortunately, under the new Act the Board is obliged to issue FFC’s within 30 working days unless there is good reason for not doing so.
Of particular importance, is to note that property developers are not included among the various industry players covered by the Act. “This means that they will not be required to hold valid FFC’s and that consumers who buy homes directly from developers will not enjoy the protection of the Fidelity Fund administered by the Board,” explains Everitt.
Lastly, consumers will only be able to make claims regarding the theft of trust money by a property practitioner if that practitioner has a FFC. “In other words, the onus now falls on consumers to ask any practitioner they deal with to produce their FFC, or they will have no recourse to the protection of the Board. We feel that the public really need to be made more aware of this,” ends Everitt.
Source: Property Professional