New property laws for South Africa in February

 ·14 Jan 2022

President Cyril Ramaphosa has announced the commencement of the Property Practitioners Act (PPA) from 1 February 2022, with the Act expected to bring significant changes to the property sector.

The PPA is a consumer-focused piece of legislation that has been designed to protect consumers in the property industry. Some of the significant changes include:

  • Defining who is a property practitioner – The Act broadens the scope of legislation beyond traditional estate agents to cover commercial property brokers, bond originators, home inspectors, homeowners’ associations, companies selling timeshare and fractional title, property developers and property managers, who now all fall under the Act;
  • Fidelity Fund Certificates – Anyone who earns a commission or brokerage from the sale or leasing of property needs a valid Fidelity Fund Certificate, which must be produced on request from a seller or landlord. The Act tightens the regulations around Fidelity Fund Certificates beyond the current requirements to include possession of a valid tax clearance and BEE certificate. It is also required that not just the agent/s, but the agency/business and all of its property practitioners must be fully compliant;
  • Property defects – This is a critical element that sellers and landlords need to be aware of. While it has for some time been best practice to include a comprehensive property defects disclosure document as part of a property transfer, it is now mandatory for all property sale and lease agreements. No mandate may be accepted from a seller or landlord without this document, which will then also form part of the sale and lease agreement;
  • New Board of Authority – The current Estate Agencies Affairs Board will be replaced by a new governing body known as the Board of Authority. This new board will govern the property profession across the board, not just estate agents, as is currently the case.

Consumer protection

In a 2021 analysis of the incoming Act, Justine Krige, director at law firm Cliffe Dekker Hofmeyr, 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,” she said.

The Act defines ‘property practitioners’ to include everyone involved in the selling, purchasing, letting, renting, financing and marketing of property. Krige said that the disclosure form must be signed by all parties and attached to the sale or lease agreement.

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.”

The Act also requires that Fidelity Fund Certificates (FFCs) be made readily 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.

Read: Property law changes planned for 2022 – here are three important issues you should be aware of

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