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The Property Practitioners Act and its impact on Community Housing Schemes

May 12, 2022 | Debtor Finance, Project Loans

The Property Practitioners Act, No. 22 of 2019 (“PPA“) has far-reaching implications for managing agents of sectional title schemes and Homeowners’ Associations. The PPA became operational on the 1st of February 2022.  Whilst some people may have thought that the PPA was merely replacing the Estate Agency Affairs Act of 1976 (“the EAAA”) and that it was aimed at the traditional estate agent profession only, that is not the case. Let’s take a closer look at the PPA and what it means for community housing schemes. 

Property practitioners 

A property practitioner is defined in the PPA as, amongst other, “any person who, for remuneration, manages a property on behalf of another”.  The definition of a property practitioner has therefore been extended to include, amongst others, managing agents of community housing schemes. This has changed the game for community housing schemes in a few ways. 

Who does the PPA apply to?

Andrew Schaefer, MD of property management company Trafalgar, said, “Firstly, it is interesting to note that the PPA also applies to any Homeowners’ Association (HOA) which sells, rents, auctions, manages or even shows any property in its own Community Housing Scheme, for any kind of financial gain.” Schaefer went on to say, “It also applies to the employees of any HOA that is deemed to be acting as a property practitioner, such as a caretaker or onsite property manager. This means that the HOA on an estate, for example, cannot earn fees by sourcing tenants and renting out homes on behalf of absentee owners, unless it is a registered property practitioner in possession of a valid Fidelity Fund Certificate (FFC). In addition, the developers of new Community Housing Schemes may not now sell any stands or homes in these schemes themselves, unless they register as property practitioners.” 

What does the PPA change?

One of the biggest changes for property practitioners is that managing agents are now regulated by the Property Practitioners Regulatory Authority (“PPRA”) and have registration requirements, as well as numerous responsibilities to comply with.  What must property practitioners do to comply?

They should apply to the PPRA for a registration certificate.

Property practitioners must be registered at the PPRA and in terms of Section 47(1) of the PPA must apply via the PPRA for a Fidelity Fund Certificate (“FFC”) every 3 years. Without registration and being in possession of a valid FFC, someone may not render the services of a property practitioner.

Where a property practitioner receives trust funds, i.e. funds are not held in the name of the Community Scheme, it needs to open and keep separate trust account(s). After opening the account(s) an auditor needs to be appointed if the property practitioner’s annual turnover is less than R2,5m and the PPRA needs to be informed of this information. If the property practitioner’s annual turnover is less than R2,5m; its accounting records must be reviewed by a registered accountant.

According to the PPA, any property practitioner that is providing a service in exchange for money or another form of payment will need to have a contract in writing. The exchange must therefore be outlined in a written contract, with clear details on what services will be rendered and what the payment will be. For managing agents, this means that it will now need to make sure that all property practitioners are registered, and they will require a written contract with the community schemes that details all services and outline remuneration in it. As such, the trustees of bodies corporate and governing bodies of HOAs will need to do their due diligence very carefully when hiring a managing agent, to make sure that they are PPA compliant. If a managing agent is not registered at the PPRA a penalty may be imposed and any remuneration paid in respect of services rendered by such a property practitioner will have to be paid back to the PPRA. 

According to the PPA, the onus now legally lies on property practitioners to make sure that any property consumer that they are dealing with doesn’t suffer any damages or loss due to an oversight of the property practitioner. This means that they will need to outline details of the sale, leasing or service in a contract to all clients. In addition to this, property practitioners are now required to tell a buyer or tenant everything they know about a property that may influence the decision to buy or rent the property. Schaefer outlines what this means for community housing schemes by saying, “However, in the case of Community Housing Schemes, we believe full disclosure should also include a copy of the conduct rules, the financial state of the scheme, information about any special levies in force and accuracy when it comes to describing ‘exclusive use’ garages, gardens and storerooms.” 

PPA prohibitions

Property practitioners may in terms of Section 58 of the PPA not enter into any kind of agreement where the use of a particular service provider is encouraged, whether this is done formally or informally. Managing agents are not allowed to receive a payment in any form or commission, nor are they allowed to pay a commission to favour a service provider. This is to ensure a system of full disclosure where there are no unfair opportunities given.  

While the PPA is more extensive than what we have mentioned above, this should give you a good idea of how the new rules will impact community housing schemes and what the changes will be for managing agents. For more information, you can find the gazetted PPA and the Regulations published thereunder here: https://www.gov.za/sites/default/files/gcis_document/202201/45735pr47.pdf

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