Estate agencies are sufficiently regulated

Posted On Tuesday, 25 January 2011 02:00 Published by eProp Commercial Property News
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The problems now being experienced by Wendy Machanik Properties, which is under investigation by the Estate Agency Affairs Board for alleged misuse of trust funds, have strengthened the perception in some people’s minds that residential real estate agencies are unregulated

Tony Clarke

This perception may suggest that the residential sector attracts to fly-by-nights and those who are prepared to sail close to the wind – but this is definitely not the case, says Tony Clarke, MD of Rawson Properties.
 
“The plain truth,” said Clarke, “is that the residential real estate industry is exceptionally tightly regulated, and we are governed by a strict regulatory code of conduct.”
 
This, he said, is the result of the industry being subject to a massive body of legislation – “of which every agent should be aware”.
 
“Among the acts controlling our operations,” he said, “are the Estate Agency Affairs Act, the Access to Information Act, the Debt Collectors Act, the Prevention of Illegal Eviction Act, the Financial Intelligence Centre Act, the Consumer Protection Act, the Rental Act – and more.  To a greater degree than any other sector, we are surrounded by effective legislation which time and again has been upheld in the courts.  Only the financial sector has a similar number of operating regulations.”
 
What is more, said Clarke, the new educational levels, which are now compulsory, have raised the entry level for agents to new heights.
 
“We are now in a situation in which every agent will have passed level four on the National Qualifications Framework and every principal will have passed level five.  These examinations are specifically designed to serve our industry and they are fostering a professionalism among agents that will make them unique in the world.”
 
Clients, he said, are protected by the fact that all agents have to be registered with the Estate Agency Affairs Board and to have a Fidelity Fund Certificate from them – and their companies also have to have FFCs.  The purpose of these is to provide safety net insurance should an agent cheat or defraud a client. 
 
The EAAB, said Clarke, can move in and audit any agency at any time – and does so on an ongoing basis, employing independent auditors and its own legal department.
 
The auditors pay especial attention to whether companies and agents have their FFCs and to their trust accounts, which by law also have once a year to submit  to the EAAB an independent auditor’s report.
 
“The first thing, therefore, that an estate agency client should do is to ask for proof that the agency is registered with the EAAB and that his agent has a FFC,” said Clarke.
 
If the client is a purchaser and is asked to pay a deposit, he can insist that this goes directly into a conveyancer’s trust account, not that of the agency.  (The Rawson sale agreement makes this the standard practice.)  Alternatively the buyer can ask his bank to issue a guarantee that the full price will be paid on transfer – in which case no deposit is necessary.
 
The EAAB, said Clarke, had done “a good job” in speeding up the issue of Fidelity Fund Certificates but, he said, they need now to educate the public on the “greatly improved” standards that have been implemented and on what can now be demanded of agencies and agents. 
 
They should also, he said, hunt down and expose any agents operating without FFCs.  This could be done by scanning the home sale advertisements and telephoning the agents involved to ask for their FFC numbers. 
 
Clients should also demand proof that the agents and their principals are either already qualified or working to obtain these qualifications. 
 
The EAAB could also, said Clarke, “partner” with the Receiver of Revenue and the Deeds Office, making these organisations report to them on any sale transaction in which the company and/or the agent is acting without a FFC. 
 
“Nevertheless, the main message that I want the public to get is that South Africa’s real estate sector is highly regulated and that the controls are now tight.  Incidents like the Machanik affair will, therefore, become more and more rare and the public will be better protected and served.”

Last modified on Wednesday, 12 March 2014 12:37

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