Festus S. Unengu
What is the Property Practitioner Bill?
It is a new piece of legislation that will replace the Estate Agency Act 112 of 1976.
Its main purpose is to establish the Property Practitioner Regulatory Authority, which will replace the Namibia Estate Agents Board; to regulate the affairs of all property practitioners; to allow for transformation in the property sector, and to provide for consumer protection.
The Act will commence on a date yet to be decided upon. Regulations must still be published. The minister must first make rules training requirements property practitioners, who will now be joining the fray, need to undergo, and the minister must also publish a code of conduct. So much work still lies ahead before the Act can commence.
Who are all property practitioners?
Any person (natural or legal), who in the ordinary course of business, for gain (i.e. against payment) holds out (i.e. this is his/her business), on behalf of another person:
auctions, rents, sells or exhibits for sale or purchase, property or a business,
manages property,
negotiates such an agreement,
canvasses for landlords/tenants/buyers or sellers of properties/businesses, or
collects or receives rental on behalf of another person,
acts as intermediary or facilitator in any of the above (neither are defined in the act but a Google definition provides the following):
intermediary – a person who acts as a link between peopleto try and bring about an agreement,
facilitator: any activity that makes a social process easy or easier.
It also includes a home owners association that does any of the above for gain, and
anyone employed by a property practitioner to do any of these things on his/her behalf, and it includes anyone who sells or markets time share or fractional ownership (basically a fancy expression for time share), and includes
anyone who is employed to manage/supervise the day-to-day business operations of a property practitioner (office manager), and also anyone who arranges:
financing for a sale or lease,
bridging finance (i.e. where a seller wants to take an advance against the proceeds of his sale), or
acts as a bond broker (someone who helps a buyer apply for a loan with the banks)
except if either of these fall within the definition of a “financial institution” under the Financial Services Board Act.
It includes directors of companies; members of CC’s and trustees of trusts, if the entity does any of the above – and also any attorney or person employed by an attorney who renders these services except if that person hold a Fidelity Fund Certificate with the Attorneys’ Fidelity Fund, and if this work forms part of the attorney’s normal practice.
Anyone may apply to the minister for exemption (partially or entirely from the Act) for up to 3 years at a time.
Fidelity Fund Certificates (FFC)
What is a FFC?
An FFC is a certificate that is issued to every property practitioner. Without an FFC, a property practitioners may not trade or be paid for any work done.
Currently, FFCs are valid until 31 December each year, which means agents have to renew them every year. Once the Property Practitioners Act commences, they will be valid for three years until 31 December of the year in which the FFC was approved.
If the firm is a company, then all of its directors must also have one; if it is a Close Corporation, then all its members – partners in the case of partnership – and trustrees in the case of trustees.
What is the point of a FFC?
The point of an FFC is to provide the consumer with protection against theft of money that has been entrusted to a property practitioner, such as money meant to buy a house, rental income or rental deposits.
In terms of the new Bill, once an FFC is issued to a property practitioner and should that property practitioner then steal money he/she held in trust, then the consumer can claim this money back from the fidelity fund. All the consumer needs to do is lay a criminal charge and be sure that the property practitioner had an FFC at the time of the theft.
This is a huge change from the current legislation because under the current Estate Agent Act, the consumer must first try to recover the funds from the property practitioner him/herself and can then only claim from the fund. The consumer must first exhaust all available remedies (i.e. sue the property practitioner, get a sheriff to try, attach and sell assets – and even possibly sequestrate the property practitioner) before one can claim money from the fund.
As such, this new process will make it much easier for the consumer to claim back stolen money. But you can only claim if the property practitioner had an FFC.
As such, the seller, buyer, landlord or tenant must always insist on seeing the property practitioner’s FFC, which must be valid at the time of the transaction, before paying over money.
What are the consequences of not having an FFC?
If an entity has just one property practitioner without an FFC, then the entity may not trade. This means no other property practitioners in its employ may work legally then either.
If a property practitioners was involved in a transaction and did not have a valid FFC at the time of the transaction, then he/she may not claim commission.
If the consumer finds out that the property practitioner did not have an FFC at the time of the transaction, then the consumer has three years to claim it back, and if the property practitioner does not pay it back immediately, he/she will be guilty of a criminal offence.
This is also a massive change from the current legal position. Currently, agents are also not entitled to be paid if they do not have an FFC – but, if an agent does get paid, the seller cannot claim it back. That will become a thing of the past.
The Bill also states that if a property practitioner does receive payment when he/she did not have an FFC, then the property practitioner is required to pay the commission to the fidelity fund.
However, if the consumer then claims it back from the fund, the fund may pay whatever amount (if any) to the consumer, which is “equitable in the circumstances”.
The new position of the conveyancing attorney
A conveyancer (attorney who attends to the transfer of properties) may not pay remuneration to a property practitioner unless the property practitioner has provided the conveyancer with a certified copy of an FFC that was valid:
during the period, or on the date of the transaction to which such payment relates
and on the date of such payments.
This is change from the current position. At present, there is no legal duty on a conveyancer to check this. Once the Bill becomes an Act of Parliament, conveyancers will be compelled to check. If they don’t, and if a seller finds out afterwards, the seller can then claim this back from the conveyancer on the basis of professional negligence.
Mandatory time periods to issue FFCs
A change PPs will appreciate is that the PPRA will have to consider any complete application for an FFC within 30 working days once the Act commences. The PPRA may obtain an additional 20 working days if good grounds exist. But if, after the first 30 (or 50) working days, the property practitioner has still not received his/her FFC, he/she may then make a written demand for it to be issued within 10 working days.
Furthermore, if the Authority has failed to consider the application within 30 (or 50) working days, the application is deemed to have been approved.
The Act also states that if a property practitioner suffers damages due to the PPRA’s negligence, the PPRA can be held liable.
Disqualifications from having FFCs
The Bill also tells us on what basis a property practitioner may be disqualified from receiving or renewing an FFC. Here, we have seen some interesting changes:
If you are not a Namibian citizen and if you do not lawfully reside in Namibia
Anyone who has at any time in the preceding five years:
been found guilty of contravening this Act, the Estate Agents Act 112 of 1976, or any similar legislation anywhere in the world;
if, by reason of improper conduct, you have been dismissed from a position of trust
in the case of a company, CC, trust or partnership, if any one of its directors/ managers/members/trustees or partners has been found guilty of contravention of this Act or the Estate Agents Act 112 of 1976, then the entity cannot get an FFC for as long as that person remains a director, etc.
Anyone who has EVER, in any court in the world, been found
to have acted fraudulently, dishonestly, unprofessionally, dishonorably or in breach of a fiduciary duty, or
guilty of any offence, for which such person has been sentenced to imprisonment without the option of a fine (regardless of the nature of the offence or the duration of the imprisonment), or
(in any tribunal, let alone court) guilty of unfairly discriminating against someone on the basis of race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.
Anyone of unsound mind
An unrehabilitated insolvent
Anyone who is not in possession of a valid tax clearance certificate.
Anyone who does not comply with the prescribed standard of training.
Displaying of FFCs by property practitioners
FFCs must be displayed at every place of business – this could include at a show house.
All letterheads and marketing material must confirm that the property practitioner has a valid FFC.
All agreements relating to property transactions must guarantee the validity of an FFC.
Limitation on relationships with other service providers
A property practitioner may not enter any arrangement where a consumer is obliged or encouraged to use a particular service provider – including the services of an attorney. Although there is no definition of the word “arrangement”, it most likely means a “financial incentive”. This means the property practitioner may not receive commission from mortgage bond originators; bridging companies; compliance companies, or attorneys, in return for which the property practitioner recommends that person’s services to a seller, for example.
Attorneys are forbidden from “buying work”, soliciting for business or “touting”. Their profession requires that they obtain business through word of mouth and conservative marketing efforts – not through the sharing of professional fees or paying for support. This Act now mirrors this prohibition.
In other words, if a property practitioner, who sells a house, recommends a conveyancer because the conveyancer pays the agent’s office rent, “desk fees”, petrol money or pays the property practitioner a percentage of the transfer fee, or anything similar, it will be a criminal offence.
And furthermore, if a consumer finds out that the property practitioner was involved in such an arrangement, the poperty practitioner must repay any such remuneration, together with interest within 30 days if requested to, else that is also a criminal offence.
Mandatory disclosure forms
a) The Act provides that a property practitioner must not accept a mandate unless the seller or lessor has provided a fully completed and signed mandatory disclosure in the prescribed form (The form must still be published)
b) This form must then be presented to any potential buyer or tenant as part of the agreement.
c) If no such disclosure accompanies the sale or lease, it must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser.
d) A property practitioner who fails to comply with this may be held liable by an affected consumer – it does not mean a buyer can now hold you, as the property practitioner, liable for all defects that are discovered after transfer. All it means is that if you wish to argue that you did disclose a defect, but this was not contained in a report, the law will presume that you did not disclose it.
e) This clause merely issues a stern warning to property practitioners that if you sell or rent out a property without such a form, there will be a statutory presumption that the buyer/tenant was not advised of any defects.
In terms of the Act, a property practitioner will owe a buyer, seller, landlord or tenant a “duty of care”.
It means a property practitioner has a legal duty to act with reasonable care, skill and diligence. This means that he/she must always take reasonable steps to ensure that a consumer does not suffer damages due to an oversight on the property practitioner’s behalf, under circumstances, when it was not only reasonably foreseeable that such conduct could result in damages, but where it was also reasonably avoidable.
It also means that the property practitioner should restrict your opinions to what you know and not what you might presume, and never express an opinion if you are not qualified to give one. For example, do not attempt to interpret title deed conditions or value a unique property unless you have the experience to back it.
*Festus S. Unengu is the manager at the Namibia Estate Agents Board