THE NEW PROPERTY PRACTITIONERS ACT & MANDATORY FIDELITY FUND CERTIFICATE
The effect of the Property Practitioners Act 22 of 2019 (the “Act”) on estate agents dealing with your property without a Fidelity Fund Certificate is profound.
The Act was promulgated with effect 1 February 2022 and repeals and replaces the ‘old’ Estate Agency Affairs Act 112 of 1976. The Act aims to modernize and broaden the ‘old’ act and furthermore intends to create, enhance and ensure a healthy property Market in South Africa. The Act sets out the framework to regulate Property Practitioners. The question now arises how this affects estate agents instructed to act for and on behalf of potential sellers and landlords and the commission payable to them?
Section 1 of the Act sets out an elaborate and complex definition of a Property Practitioner and aims to put a lot of different role players, from different sectors in the property industry, under the same umbrella. Does this mean the term ‘estate agent’ no longer exists? No – the term ‘estate agent’ is similarly defined in the Act as to the definition in the ‘old’ act. For purposes of this article, the main focus will fall on estate agents, in the traditional sense, as property practitioners.
Previously, Estate Agencies have always had to obtain a Fidelity Fund Certificate in order to operate. Section 47 of the Act now states that it is simply not enough for the agency to hold such a certificate but individuals, employed as property practitioners (estate agents), directors, members, trustees and partners (whichever applicable, and directly carries out business to a material degree to property transactions) are now all also obliged to obtain a Fidelity Fund Certificate. It is further mandatory to display such a certificate. All mandates and agreements relating to the property must contain the prescribed wording which serves as a guarantee that the agent possesses a valid Fidelity Fund Certificate. (“[Name of property practitioner] hereby warrants the validity of his/her/its Fidelity Fund Certificate as the date of signature of this Agreement”)
The consequences of not obtaining a Fidelity Fund Certificate by individual Property Practitioners are that estate agents may not act or operate as an estate agent and if in contravention, will be guilty of an offence in terms of Section 48 of the Act. The estate agent will also not be entitled to receive any remuneration and the party who paid the commission will be entitled to claim repayment (although this can be a tedious and painful process). Conveyancers holding estate agents commission must obtain a certified copy of the property practitioner’s Fidelity Fund Certificate before paying commission to the estate agent. If the Conveyancer pays the funds without obtaining the needed certificate, criminal proceedings may be instituted against the Conveyancer. The purpose of the Fidelity Fund is to compensate persons who have suffered monetary loss due to the theft or misuse of trust money by a Property Practitioner. Any person may lodge a complaint against a Property Practitioner with the Property Practitioners Regulatory Authority on a prescribed form as per the regulations of the Act.
The aspect of the obligatory Fidelity Fund Certificate needed by all Property Practitioners in terms of this Act is only a drop in the bucket of the Act in its entirety. The Act was set to ‘polish’ the ‘old’ act and forces property practitioners to obtain the proper qualifications needed to protect themselves and the interests of all parties involved in property transactions. It is crucial for all property practitioners to have a proper understanding of the Act and the consequences of non-compliance.
Article by Lorandi van der Merwe (LLB) , Jnr Associate
For more information kindly contact Lorandi at lorandi@rgprok.com or 044 601 9900. www.rgprok.com
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Disclaimer
Nothing contained in this publication is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This publication is intended for educational and informational purposes only.
