Property council sends warning to estates and gated communities in South Africa

The National Property Practitioners Council (NPPC) has noted that actions are being taken to address the ongoing concern of HOA profit-making practices and has reminded those participating that it is illegal, as outlined by the Minister of Human Settlements.

The National Property Practitioners Council is South Africa’s largest property sector trade association.

The Council’s member organisations collectively represent over 40,000 registered property practitioners involved in all aspects of the residential and commercial real estate industries.

As part of its mandate to transform the sector, the Property Practitioners Regulatory Authority (PPRA) recently announced a proposal that all real estate agents should meet a level 8 BEE requirement to be eligible to receive an FFC certificate.

Vuyiswa Ramokgopa, Chairperson of the NPPC, noted that the council support the PPRA’s desire and legal mandate to promote transformation within the real estate industry.

Considering this, the NPPC proposed steps that can be taken now, without further damaging the industry, to effect lasting change.

However, in its proposals, the NPPC outlined the industry’s challenges, and one of them was market access, in which profit-making practices of some Homeowners Associations (HOAs) were of notable concern.

The NPPC said that while the practices affect many agents, they are particularly anti-transformative.

Ramokgopa explained that there is evidence of black agents being excluded from participating in marketing properties in gated/security estates through high costs fees for ‘accreditation’ and other guises employed by HOAs.

Encouragingly, it highlighted that the PPRA has already started taking action against some of these HOAs.

However, Ramokgopa reminded those who are still involved in profit-making practices of Section 63(1) of the Property Practitioners Act.

Section 63(1) of the PPA states that arrangements in which an HOA, for example, receives money or another form of reward for providing an advantage to one agent over the other or excluding another agent are undesirable business practices.

By extension of these regulations, the NPPC added that the Minister of Human Settlements also declares these business practices undesirable and prohibited.

Earlier this year, the Real Estate Business Owners of South Africa (Rebosa) highlighted that profit-making practices by Homeowners’ Associations (HOAs) are an ongoing concern in South Africa, posing a major problem for both homeowners and estate agents.

Rebosa CEO Jan le Roux noted that he was made aware of several cases where the seller’s Rates Clearance Certificate (RCC) was withheld until the agent involved paid the HOA an ‘agreement’ fee—holding up the seller’s transaction to the benefit of the estate.

Le Roux said these fees range from R5,000 per year or R5,000 per transaction to 1% of the selling price being charged and are justified by the need for security checks, gate access, training agents on the association’s rules, and marketing within the estate.

Le Roux agreed with the NPPC and said any such arrangement is illegal and that agents are prohibited from engaging in it.

He further explained the tactic also hurts sellers in the estates.

Le Roux pointed out that when an agent has to pay a high fee, they may be less willing to negotiate their commission with the seller.

Additionally, if agents who cannot afford the fee or are unwilling to break the law are excluded, the seller has limited options in choosing their representative.

Read: Trouble for homeowners in South Africa – even in complexes and estates