New property laws for South Africa – what you need to know

Signed into law by president Cyril Ramaphosa in 2019, the Property Practitioners Act (PPA) is currently awaiting official commencement in South Africa, notes Justine Krige, director at law firm Cliffe Dekker Hofmeyr.

While there is no firm indication as to when the PPA will come into force, it is expected to bring significant changes for the sector, especially for consumers, she said.

“The PPA is a consumer-focused piece of legislation that has been designed to protect consumers in the property industry. In line with this, the PPA obliges property practitioners to deliver a ‘disclosure form’ to a seller/lessor before concluding a mandate, and to a purchaser/lessee before making an offer.”

The act defines ‘property practitioners’ to include everyone involved in the selling, purchasing, letting, renting, financing and marketing of property.

The disclosure form must be signed by all parties and attached to the sale or lease agreement, Krige said.

If no disclosure form is signed and attached, the PPA provides that the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser.

“A property practitioner cannot accept a mandate unless the seller or lessor has provided a fully completed and signed disclosure form.”

Certification, trust accounts and record-keeping

The act also requires that Fidelity Fund Certificates (FFCs) be made easily available for consumers to inspect.

Attorneys and other legal practitioners with trust accounts are required to obtain a Fidelity Fund certificate each year.

“FFC holders must have their certificate prominently displayed in every place of business where they conduct property transactions,” Krige said.

“The FFC holder should also ensure that the prescribed sentence regarding holding an FFC is reproduced on any letterhead or marketing material.

“Importantly, in any agreement relating to property transactions, the FFC holder must include a prescribed clause guaranteeing the validity of the certificate.”

Every property practitioner must also:

• Open and keep one or more separate trust account/s;
• Appoint an auditor;
• Provide the Property Practitioners Regulatory Authority with all information regarding the trust account/s and auditor appointed;
• Deposit all trust money in the relevant trust account; and
• Keep separate accounting records for the trust account/s and have them audited.

Impact on service provider selections

Section 58(2) of the PPA also outlaws any type of practice in which a practitioner provides a consumer with an incentive to use a particular conveyancer or service provider.

This is probably one of the most debated sections of the PPA, with significant practical ramifications for the way property practitioners do business, Krige said.

“These obligations are clearly intended for the protection of consumers. Any property practitioner in contravention of the PPA will be required to repay any fees received for a property transaction and may be issued with a fine.

“Furthermore, any person convicted of an offence in terms of the PPA is liable to pay a fine, or to imprisonment for up to 10 years.

“Thus, even if property practitioners do not hold monies in trust, they will need to comply with the remaining obligations in terms of the PPA.”

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