The Property Practitioners Bill (PPB) was recently gazetted for comment and is expected to be tabled later this year in Parliament. Industry Information Sessions start next week on Monday 12 June. Rosh Pinah asked Neil Gopal, CEO of SAPOA, about key aspects of the Bill and the implications for South Africa’s commercial property sector.
RP: What for you are the most pressing issues that face the commercial property sector as a result of Property Practitioners Bill?
NG: That the EAAB applies for the property industry’s exemption from the application of the provisions of section 14, 16 and 56 of the CPA. The requirement that each director of a property practitioner company be registered as a property practitioner has been brought forward from the EAA Act. We are, however, of the opinion that this requirement is no longer appropriate. While we acknowledge that it will be important for those directors who are actively involved in the day to day running of the property practitioner business to be registered as property practitioners, we are of the opinion that a blanket registration requirement is too restrictive because it does not allow the industry to draw on the skills and expertise of other areas such as expertise in law, banking, construction or environmental scientist.
Today, we see huge property practitioner companies operating within the property sector. These entities require diverse boards with a variety of specialised skill-sets to govern and direct such companies adequately. Creating a closed profession stifles competition and restricts efficiency and development in the industry because it would excludes ancillary fields. This in turn may possibly reduce employment and drive up costs for the consumer. Allowing environmental, civil, regulatory, legal and financial experts to partner with property experts on the boards of property practitioner entities will not only be in the company’s best interests but in the public’s best interests too as those boards will be able to ensure better service delivery on a holistic basis.
RP: What are the top five recommendations made by SAPOA in terms of this bill (or the majors)?
- NG: Composition and appointment of the Board. SAPOA notes that while the draft Property Practitioners Bill intends to regulate more stakeholders within the property industry as defined through the definition of a “property practitioner”, the composition of the Board focuses on the professional expertise and or experience required. While such is important, it is however critically important that the Board should be representative of the various regulated sub-sectors of the property industry. It is important that the required expertise and experience should be available to enable the Board to take policy and strategic decisions after consideration of implications on various regulated property practitioners.SAPOA urges that the Board must constitute members who represent the commercial property sector in the composition and appointment of the Board.
- We note that section 37(2) empowers the Minister, in consultation with the Board, to limit the amount which may be paid from the Fund in respect of any category of claims. We are of the view that such a limitation is unjustified and may very well lead to a loss of confidence on the part of the public in dealing with property practitioners.
- The Property Practitioners Bill currently provides that every property practitioner must open and maintain a trust account. Bearing in mind the ambit of the definition of property practitioner, various role players within the property sector will constitute property practitioners but are as a matter of course not required to handle money on behalf of the public as part of their operations as property practitioners. We are of the view that only those property practitioners which in fact hold money in trust on behalf of the public should be required to maintain trust accounts. The wasted costs associated with holding a trust account and having same audited every year even where that trust account remains unused places a further hurdle in the way of promoting participation within the property sector. We recommend that a distinction be drawn between those property practitioners which actually require trust accounts and those which do not and the Fidelity Fund certificate issued to those property practitioners which are permitted to hold trust accounts should then contain an endorsement to that effect. We note that section 53 does not cover the manner in which interest earned on trust accounts should be dealt with. We are of the view that the current position under section 32 of the EAA Act should be brought forward and interest accrued on the balances in trust accounts should be paid to the Fund.
- Listed property owners are already highly regulated and have to comply with, inter alia, the listing requirements of the JSE, the Companies Act No. 71 of 2008, the Property Transformation Sector Charter, to the extent applicable Real Estate Investment Trust legislation, the Income Tax Act No. 58 of 1962, to the extent applicable the Financial Intelligence Centre Act No 38 of 2001; Employment Equity Act No. 55 of 1988 to name a few. Non-listed commercial property owning companies are also highly regulated companies having to comply with similar legislation to listed companies. SAPOA also submits that non listed property owners should also be exempted from being classified as a property practitioner. For the reasons stated above, SAPOA strongly recommends that property owners that have established subsidiary management property companies of their listed holding company, listed property owners and general commercial property owners should be exempt from the definition of “property practitioner” in the Bill.
- Neither the Act nor the Bill has provisions relating to exclusions from the Act. Exclusion provisions differ from exemption provisions in that in respect of the latter, the Act is applicable to a person or entity that is under regulation but can on such grounds as are provided in the Act, apply for any or all provisions of the applicable Act, not to be applicable. Exclusion provisions state expressly that the Act or some of its provisions are not applicable to a person or legal entity.
RP: Once tabled and passed how much time do brokers have to conform to the regulations contained in the Property Practitioners Bill?
NG: Most Acts allow for a one-year after promulgation for implementation. However regulations normally follow and that takes a longer time.
RP: How would you characterise the state of the commercial property sector in SA at this time?
NG: Non-listed commercial property owning companies are highly regulated companies having to comply with similar legislation to listed companies. SAPOA also submits that non-listed property owners should also be exempted from being classified as a property practitioner. For the reasons stated, SAPOA strongly recommends that property owners that have established subsidiary management property companies of their listed holding company, listed property owners and general commercial property owners should be exempt from the definition of “property practitioner” in the Bill.
RP: Any more?
NG: SAPOA submits that where decisions of a subsidiary company are done by the holding company, then in such circumstances, the EAAB should not regard the subsidiary company, which manages properties owned by the holding company, as brokers to be registered with the EAAB. In this instance, the subsidiary company should be exempted from being classified as a property practitioner.
- Section 4 of the Property Practitioners Bill makes provision for any person to apply to be exempted from compliance with any specific provision of this Act. Whilst the inclusion of the section is commendable, we recommend that provision be made to group exemptions that could apply to a specified class of persons. This will lessen the burden placed on the Authority to consider multiple applications from the same industry players who are facing the same issues.
- Section 48(3) makes provision for the deemed approval of an application for a fidelity fund certificate. Notwithstanding the fact that the Authority is supposedly compelled to issue the fidelity fund certificate to the applicant concerned under the circumstances contemplated in section 48(3), the Authority may nonetheless fail to do so. We are of the view that for so long as the application is deemed to have been approved in terms of section 43(3), the property practitioner concerned should be deemed to be in possession of a fidelity fund certificate for the purposes of this Act until such time as the Authority actually issues the certificate in terms of section 48(3).
- We note that the inspector is given the power to enter and inspect any business premises of a property practitioner without a warrant. Given the fact that certain property practitioners have multiple businesses, some of which are entirely unrelated to their business as a property practitioner, we are of the opinion that the inspector’s warrantless search and seizure powers should be limited to business premises in respect of which the inspector has reason to believe (i) any person there is performing an act as an property practitioner, (ii) it is connect with an act performed by a property practitioner, or (iii) there are books, records or documents to which the provisions of this Act are applicable.
- SAPOA has no objection in principle in respect of the payment of registration and renewal fees as funding of the regulatory framework must be supported. SAPOA hereby recommends that the period of validity for Fidelity Fund Certificate should be changed from one (1) to 3 (three) years.
For more information about the upcoming Property Practitioners Bill, click here