Property Practitioners Act: What it means for developers

The new act was a long time in coming: it repealed the 43-year-old Estate Agency Affairs Act 112 of 1976, introducing important changes to the real estate industry (including regulating the buying, selling and renting of land and buildings). It puts in place better monitoring mechanisms, including small but significant changes like, for example, requiring inspectors to obtain warrants to enter premises.

There was, inevitably, a whole load of debate around the new law. As industry body Rebosa (Real Estate Business Owners of South Africa) was quick to point out: ‘There is […] a long road ahead as the regulations must now be drafted, published for comment and finally approved by the minister. Only then will the bill be promulgated to become an act. Incidentally, it is even technically possible that it never gets to be promulgated.’ Rebosa CEO Jan le Roux went on to tell SAFM that the new act is more of a renovation than a complete overhaul of the old act.

Before we unpack the act and what it means for estate developers, it’s worth checking the act’s definition of the term ‘property practitioner’. To sum up 25 lines of dense legalese, a property practitioner is any person or entity that markets, sells or lets immovable property on behalf of another person for some form of gain. This, by interpretation, would include estate agents, rental agents, mortgage originators, property inspectors, valuators, property managers and property developers – along with anybody (or bodies!) that acts as a facilitator of an agreement of sale or lease … which would include a homeowners association.

Notable exclusions from this definition are attorneys and candidate attorneys, sheriffs of the court, and a person offering property practitioner services (but not in the normal course of their business). Unless a developer is a natural person selling his or her own property, all property developers must comply with the act.

For developers, there are three stand-out sections of the act that deserve close attention.

In terms of Section 55, property practitioners are now required to keep all records – that’s all correspondence, legal agreements, and copies of advertising and marketing materials – for a period of five years. The good news is that these can be stored electronically; the bad news is that you’re going to have to keep all your fliers and adverts saved on a hard drive somewhere for half a decade.

Then in Section 58, it states that a property practitioner may not enter into any arrangement (formally or informally) ‘whereby a consumer is obliged or encouraged to use a particular service provider including an attorney to render any service or ancillary services in respect of any transaction of which that property practitioner was the effective cause.’ In other words, property practitioners aren’t allowed to specify that a particular service provider is preferred to the exclusion of other service providers.

Finally, Section 67 has another interesting surprise. The act requires sellers of a property to disclose all property defects – and it does not distinguish between latent and patent defects. A property practitioner may not accept a mandate to sell or let a property (residential or commercial) without receiving a mandatory disclosure form from the seller or lessor. That signed disclosure form then forms part of the sale or lease agreement. If a written disclosure is not included, the agreement will be interpreted as if no defects or deficiencies were disclosed.

More sections and subclauses will, of course, come under the microscope as the Property Practitioners Act comes into effect, and a few kinks will naturally have to be ironed out along the way (that’s why regulations exist!).