From 1 February, the Property Practitioners Act will affect you as a property seller, buyer, landlord, or tenant
On February 1, 2022, the Property Practitioners Act (“PPA”) takes effect. It has far-reaching implications for everyone in the real estate sector, but in this piece, we’ll focus on issues that are particularly important to property sellers and purchasers, as well as landlords and tenants.
The full definition of “property practitioner” in the PPA is long and complex, with some grey areas still to be resolved, but for our purposes, let’s just say that estate agents and agencies, property auctioneers, property managers, bond originators, and the like all fall under the umbrella.
Now we’ll look at some of the more significant changes that will affect you on a practical level as of February 1st.
New mandatory disclosures by sellers and landlords
It has traditionally been standard practice for sellers and landlords to provide comprehensive written disclosures to potential buyers and renters of any property defects or flaws that they are aware of, and to attach a list to the sale/lease agreement. The Rental Housing Act currently allows for joint inspections on both incoming and exiting residential leases.
The PPA now states that no PP can accept a mandate unless it includes a “required disclosure form” that must be given to any potential buyer or tenant, signed by both parties, and attached to the sale agreement/lease. The form published in the new Regulations is only for sellers, so it’s unclear (at the time of writing) what form landlords should use. The form requires sellers to answer a series of questions (and certify the answers as correct) relating to defects (structural and other), to disclose any boundary line disputes/encroachments/encumbrances, to certify that all necessary consents and permits were obtained for any additions/improvements, and to disclose any harmed property. There’s also a general “Additional Information” section.
The document expressly says that it is not a replacement for inspections or warranties, so buyers/tenants should still include these in their agreements, but it does offer proof of any faults or shortcomings disclosed or not disclosed (there is a presumption against disclosure if no form is supplied).
Sellers and landlords should exercise caution here, and it’s worth noting that they’re not the only ones who might face legal action if they don’t follow the rules — a buyer or renter could hold the PP accountable if they don’t.
When commission isn’t payable (and can be clawed back if already paid)
In most cases, commission is paid to a PP by the seller in a transaction or the landlord in a letting agreement. The PPA specifies two scenarios in which a PP is unable to earn commission or any other payment, and in which you can seek reimbursement (under penalty of prosecution if you do not repay) if you have already paid.
The PPA clarifies that in order to act as a PP, FFCs must be held by all employed PPs, as well as all directors (if a company), members (if a close corporation), trustees (if a trust), and partners (if the agency is not a sole proprietorship) (if a partnership). Another protection is that before making any commission or other payment, the conveyancer conducting the transfer must get a certified copy of the PP’s FFC.
Another circumstance in which a PP cannot claim commission is if the requirement not to “enter into any arrangement, formally or informally, whereby a consumer is obligated or encouraged to use a particular service provider, including an attorney, to render any service or ancillary services in respect of any transaction in which that property practitioner was the effective cause” is violated. This is presumably an attempt to limit the payment of referral fees to PPs for recommending or requiring the use of a specific service provider, such as a transferring attorney, bond originator, compliance certification service, and so on, but at the end of the day, your best interests as a seller or landlord are served if you insist on using your own.
