The Property Practitioners Act: Improved Consmer Protection When Purchasing or Leasing Property

The Property Practitioners Act 2019 (“the Act”) Act was passed in April 2019 and is awaiting the President’s signature. The Act introduces provisions which regulate property practitioners in the business of:

bond broking, home inspecting, facilitating sale or lease agreements, selling of timeshares or fractional titles, property management, property development, auctioning, letting or hiring, assessing or valuating and bridging finance.
The Act prescribes formalities to address issues which will safeguard the interests of consumers which in the past were not adequately addressed. Some of which are:
Fidelity Fund Certificate – At present some property practitioners do not require a fidelity fund certificate in order to conduct business. Under the Act all directors of companies must have a fidelity fund certificate, failing which no monies may be received by the business and any monies received will require to be refunded to the client. In respect of conveyancing transactions, a conveyancer may not pay any remuneration or other monies to a property practitioner unless that property practitioner has provided a copy of the fidelity fund certificate.
The Act restricts the issuance of a fidelity fund certificate by specifying those persons whom may not be issued with a fidelity fund certificate.
The purpose of a fidelity fund certificate is to assure the public that the property practitioner is legally entitled to carry out its business. As such the fidelity fund certificate is an important control measure to help reduce the risk to the public against fraudulent property practitioners.

Trust Account – Under the Act, a property practitioner must have a trust account wherein clients deposit funds. The funds are neither that of the business nor the property practitioner. The funds must be retained by property practitioner in the trust account until the property practitioner is instructed to make payment therefrom to any person.
The trust account obliges the property practitioner to keep their business money and clients’ monies separate. Thus, ensuring that the funds may only be transferred to the property practitioner’s business when the funds are earned by the property practitioner or being otherwise lawfully entitled to the funds.

Latent and Patent Defects – Under the Act, property may not be sold or leased without a mandatory disclosure form by the seller or lessor of latent or patent defects to the property. This protects the purchaser or lessee as such disclosure form must be attached to the sale or lease agreement.
Ombudsman – The Act establishes a Property Practitioners Ombud’s Office. The office allows for an economical and expeditious manner of disposing of complaints lodged in terms of the Act in respect of financing, marketing, managing, letting, hiring, sale and purchase of property.

Use of Service Provider – The Act provides that a service provider may not enter into any arrangement whereby a consumer is obliged or encouraged to use a particular service provider, including any ancillary services. This is in respect of any transaction for which the practitioner was the effective cause.

It is therefore prohibited for a property practitioner to specify that a certain service provider is preferred to the exclusion of other service providers. The Act makes is clear that the choice of service provider is not to be determined by the property practitioner.
For example in transactions where the services of a conveyancer are required, the property practitioner is precluded from directing the consumer as to which conveyancer the consumer can instruct.

Language of Choice – The property practitioner must draft an agreement to sell and purchase or to let and hire property in an official language that is requested by the purchaser or the lessee.

Consumer Education and Information – The Property Practitioners Regulatory Authority must from time to time conduct campaigns to educate and inform the general public of their rights in respect of property transactions. The campaigns will also educate property practitioners of their functions, duties and obligations.

Inspectors – For the purpose of ensuring compliance with any provision of the Act an inspector may at any reasonable time and without prior notice or search warrant, conduct an inspection to determine whether the provisions of this Act are being or have been complied with.

Property Sector Transformation Charter Code – The Act provides for the establishment of a code of conduct to regulate the conduct and behaviour of property practitioners.

These are some of the changes which consumers in the property market can look forward to when the Act comes into effect. To provide property practitioners time to get their affairs in accordance with the provisions of the Act, once signed the Act may determine a date as to when it will come into effect.

Nolwazi Mathebula, Candidate Attorney
Reviewed by Sifiso Msomi, Partner
Property and Conveyancing Department