New Property Practitioners Act requires developers to trade with a licence

The new Property Practitioners Act coming into effect on Tuesday will now require that property developers have a licence to trade and also aims to better regulate and transform the industry. 

The act replaces the Estate Agency Affairs Act and will allow for formalised transformation. It aims to regulate the affairs of property practitioners acting on behalf of landlords, tenants, sellers or buyers in the leasing and selling of property.

Property developers will now be known as property practitioners, as are real estate agents, and will have additional compliance and certification requirements.

Previously, there was no legislative framework regulating the activities of property developers except that provided by the National Home Builders Registration Council. This body does not necessarily regulate the activities of property developers but prescribes building structural standards, said Joseph Sakoneka, CEO of the National Property Practitioners Council.

On the new act, Raaziq Ismail, head of legal at Balwin Properties said: “We are aware of the act and are in the process of obtaining advice as it is unclear how it is to be implemented or interpreted. We remain committed to working with the regulators on establishing pragmatic governance practices and processes that will support a transparent and growing property sector.”

Barnard lawyer Wilco du Toit said failure to comply with the act constitutes an offence with practitioners liable to a fine or to imprisonment for a period not exceeding 10 years.

The new regulations include the requirement of a trust account of which an audited report needs to be submitted annually to the Property Practitioners Regulatory Authority. Also, practitioners may not enter into an agreement whereby a consumer is obliged or encouraged to use a specific conveyancer (property attorney) in any property transaction.

“The financial implications of noncompliance with the act may lead to profits from property transactions to be repaid that would effectively cut off the income of any property practitioner,” Du Toit said.

Transformation

“The new act is a game-changer as it incorporates many of the changes since 1976 that were not catered for in the legacy legislation, the Estate Agency Affairs Act, 112 of 1976,” Sakoneka said.

Chapter 4 is dedicated to transformation. He pointed out that a mere quarter of more than 40,000 property practitioners in SA are black (African, coloured or Indian), according to the 2020/2021 audited annual report of the Estate Agency Affairs Board.

“This grim picture of an untransformed sector was going to persist without a legislative framework that guides efforts to change the property landscape in the country. Transformation is not only the authority’s strategic objective but rather a national imperative.”

Sakoneka said the property sector has huge potential for unlocking many economic opportunities that can help the government alleviate unemployment, especially among the youth. “I believe that the act is a game-changer and will, if applied correctly, level the playing fields.”

Master Builders SA (MBSA) views the inclusion of property developers as a positive move that will accelerate transformation in the sector, which should not only be limited to ownership. The MBSA is SA’s national representative body for the building and construction industries.

However, the organisation said challenges come with new acts and regulations, adding that the red tape involved may not be good for business.

“You have compliance and FFC [Fidelity Fund Certificate] requirements which depend on the efficiencies and effectiveness of government entities issuing them. Failures, delays, and disputes with those entities such as the SA Revenue Service and the Public Procurement Regulatory Authority may create huge frustrations and business pressures to the developers,” the organisation said.

In the initial stages of implementing the act, the MBSA said, there may be litigation and court applications for declaratory orders to clarify certain areas that may not be clear or may be subject to different interpretations.

Sakoneka said developers who do not wish to sell their own developed units are obliged to procure professional property services from registered property professionals, and this inevitably increases the property market size and is beneficial to the industry.

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