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New property law is not for all

Bond originators say they are exempt from regulation by the new Property Practitioners Act.

Bond originators say they are exempt from regulation by the new Property Practitioners Act.

Published Jan 21, 2022


The much-anticipated Property Practitioners Act finally comes into effect on February 1, but it appears that bond originators may not be regulated by this legislation.

The Act – which repeals and replaces the whole of the Estate Agency Affairs Act, regulations and code of conduct – aims to protect consumers within the property industry, and was initially believed to regulate all players within the industry.

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This included estate agents and agencies, providers of bridging finance, bond originators and conveyancers.

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However, legal advice sought by the bond origination industry, represented by the Mortgage Origination Council of South Africa (MORCSA), states otherwise.

Explaining further, Kevin Mountjoy, director at BondGallery, says originators are, by definition, excluded from being classified as ‘property practitioners’ under the new Act.

“The Property Practitioners Act defines a ‘property practitioner’ to be any person including a ‘bond broker’, but excluding any person contemplated in the definition of ‘financial institution’ in section 1 of the Financial Services Board Act, 1990.

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“As the Financial Service Board Act, 1990 has been repealed, the reference to that repealed Act will be read as a reference to its replacement Act, namely the Financial Sector Regulation Act.”

He says bond originators or bond brokers are regulated by the Financial Sector Regulation Act, and the Financial Sector Conduct Authority (FSCA) has confirmed this in writing to MORCSA. This has also been shared with the Estate Agency Affairs Board.

“Accordingly, we are clear that the above exclusion from the definition of property practitioner applies to originators, meaning that originators are not property practitioners as defined…

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“In support of this, it would clearly not be necessary for origination as ‘bond brokers’ to be regulated by both the Property Practitioner Regulatory Authority and the Financial Sector Conduct Authority. Avoiding dual regulation would have been the primary reason for the exclusion…”

Mountjoy says section 58 of Property Practitioners Act regulates arrangements between real estate agents and service providers in the real estate value chain following the conclusion of a deed of sale. And while origination is one of many such ‘service providers’ that will include attorneys, banks, compliance certificate providers, bridging financiers, and other ancillary service providers, the interpretation of this section is “not clear and will develop over time”.

“However, the concern is that a broad interpretation of the section could have an impact on arrangements that are currently common place in our industry, such as the payment of referral commissions to real estate agents by banks and originators.”

He adds: “As an industry, we believe that the marketing and introductory relationships and arrangements between real estate industry and origination have had significant pro-consumer benefits. These benefits include improved access to credit and better pricing for consumers across the spectrum, as well as buyer education, especially for first time home buyers. That is the value of proposition of origination. “

MORCSA has commissioned a comprehensive economic report in support of this view of the pro-consumer benefits of origination. This expert report will be used in support of the exemption application.

Meanwhile, Maryna Botha, director of STBB, says the Act will have a fundamental effect on the industry.

“There is no singular further act that should have a bigger impact on this industry, except that the convergence of so many new laws, including the Protection of Personal Information Act (Popia), the Financial Intelligence Centre Act (Fica) and the Property Practitioners Act, substantially increases compliance responsibilities and makes running a business daily more demanding.”

David Campbell of Meumann White Attorneys summarises the changes that will be brought about by the Act:

  • It will apply not only to estate agents and agencies, but to all property practitioners.
  • The Estate Agency Affairs Board will be replaced by a board of authority, a body tasked with governing all property practitioners.
  • No property practitioner will be entitled to any commission if they do not have a valid Fidelity Fund Certificate.
  • Property practitioners will be entitled to receive commission from a property sale only upon registration of transfer and this cannot be contracted out of.
  • All property sellers will be obliged to provide a snag list of any defects they are aware of in a property. If an agent sells a property without having obtained a snag list they can be held to be personally liable for the costs of rectifying any issues with the property.


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