Legal Articles

PROPERTY PRACTITIONERS – IS BEE COMPLIANCE POSSIBLE AT ALL?

The Property Practitioners Act 22 of 2019 (PPA) came into effect on the 1^st of February 2022, thereby repealing the Estate Agency Affairs Act of 1976, which had largely regulated the real estate sector in South Africa. Under the PPA, all parties who deal with property and related matters in their ordinary course of business are all referred to as property practitioners.

The PPA brought about significant changes in the regulation of the property sector in South Africa, such as when and how Fidelity Fund Certificates are issued, the requirement for a compulsory disclosure form, the prohibition contained in Section 58 as well as with regard to transformation in the property sector.

Perhaps before we delve into the issue of compliance itself, it is pertinent to discuss the provisions that bring the issue of transformation into the fray. The PPA makes it plain within the Preamble that it seeks, amongst its purposes, to transform the property market as it is a necessary intervention that will benefit historically disadvantaged individuals. Any entity or individual may not act as or in the capacity of a property practitioner without a valid Fidelity Fund Certificate (FFC) (section 48), which may not be issued without a BEE certificate (section 50 (a) (x). The assumption is that minimum compliance with BEE is sufficient, as the PPA itself does not specify in this regard.

The question that becomes prominent would then be, is compliance with these provisions possible at all? Besides the issue of possibility, due to the fact that these provisions are now law and in force, it is advisable for property practitioners to comply in order not to suffer the inconvenience of not being able to operate.

Family-owned estate agencies and sole proprietors may find it difficult to attain even the minimum (Level 8) of BEE compliance, mainly because of the ownership structure. The Amended Property Sector Code (APSC) of 2017 classifies property businesses into three categories being the Exempted Micro Enterprises (EMEs), Qualifying Small Enterprises (QSEs) as well as the Generic Enterprises. Estate agencies, brokers or valuators with an annual turnover of less than R2 500 000.00 (Two Million Five Hundred Thousand) are considered as EMEs, and compliant with B-BBEE as level 4 contributors (provided that they are less than 51% black owned). A sworn affidavit or a Certificate from the CIPC to confirm the level of black ownership and the annual turnover is required. QSEs are estate agencies, brokers or valuators whose turnover exceeds R2.5 million but below R35 million.

Most estate agencies or property practitioners will exceed the stipulated EME threshold, meaning they will have to be evaluated for BEE contribution in respect of ownership, management control, skills development, enterprise development, employment equity, procurement (supplier development), socio-economic and economic development, on a scorecard system (please see below QSE evaluation scorecard). 

                       (Above: QSE Scorecard     Source: www.bbbee.co.za) 

On the scorecard, the element of ownership is an evaluation of the extent to which property businesses are owned by parties regarded as black, whilst the skills development element measures the initiatives carried out to enhance the competencies of black employees and black people internally and externally.

In all however, it must be remembered that if the agency is at least 51% black owned, it will be regarded as a Level 2 BEE contributor, whilst the one that is 100% black owned will qualify as a Level 1 contributor. Regardless, the APSC provides that an EME is still allowed to be evaluated using the scorecard should they wish to maximise their points and be recognised on a higher Level.

Complying with the BEE requirement of the PPA will come with some sacrifices for some agencies and property practitioners. We have acquainted ourselves with the new provisions and we are available to consult with Principal Property Practitioners to assist them in navigating through the new requirements under the PPA. We specialize in BEE compliance consulting for all agency categories under the property sector code.

Please refer to the below links for relevant information from our previous blogs:

https://phoenixgroup.finance/Blog/entryid/178/how-far-transformation-goes-in-terms-of-the-ppa 

https://phoenixgroup.finance/Blog/entryid/168/the-property-practitioners-act-and-bee 

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