Real estate agents warned of licensing risks over BEE compliance

After ratcheting up pressure on licensed financial services providers (FSPs) to comply with transformation targets, government has turned its attention to real estate agents.

In a letter to the industry this month, the Property Practitioners Regulatory Authority (PPRA) has warned practitioners that failure to comply with BEE legislation “may result in the inability to obtain or renew a fidelity fund certificate (FFC)”.

It says that according to the Property Practitioners Act, “it is mandatory for all principal property practitioners to possess a valid BEE certificate”.

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Skills development filings are due on Tuesday (30 April). It requires these filings to ensure that points for the skills element of the BEE scorecard can be “verified”.

BEE threshold

At a webinar held by the PPRA in March, the regulator’s legal manager and acting transformation manager, Deli Nkambule, made it clear that the PPRA “will not issue an FFC unless a compliant BEE certificate accompanies the application”.

“The accepted level of compliance is 40 points or more (BEE Level 8). You will not be issued a BEE certificate if you score below 40 (making your BEE certificate non-compliant).”

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This was the first time this specific threshold was mentioned. At the start of March, the PPRA issued a wordy and completely unspecific statement calling on “all stakeholders to drive transformation in the real estate sector”. No specific initiatives or timing or thresholds were included in the statement.

Legal requirement

Property practitioners are not allowed to legally operate without a valid fidelity fund certificate. These are issued every three years, with the next batch due in 2025. In 2022, it said it ‘required’ BEE certificates but issued fidelity fund certificates regardless of whether these were submitted or not.

Entities with annual turnover of under R2.5 million qualify as exempt micro enterprises and aren’t subject to this regulation.

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Qualifying small enterprises are those with annual turnover of under R35 million. These (and large enterprises) will need to undergo a formal audit to obtain a BEE certificate at their expense.

The amended property sector scorecard effectively requires entities to be at least Level 8 contributors for them to be compliant.

Points are awarded across seven criteria: ownership, management control, employment equity, skills development, enterprise and supplier development, socio-economic development and economic development.

Sakeliga takes a stand

Lobby group Sakeliga says the threat by the PPRA to withhold fidelity fund certificates is an “existential threat to businesses”.

The group argues that there is no legislation making a minimum level of “BEE compulsory for property practitioners”, but “the PPRA has decided that BEE certificates must have at least 40 points to be valid”.

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In a letter to industry stakeholders, Sakeliga CEO Piet le Roux says it intends mounting a legal challenge to the PRRA as “the PPRA is acting unlawfully, because a certificate with zero B-BBEE points is as valid as any other”.

“The Act does not authorise the PPRA to determine how many points a B-BBEE certificate needs”.

Sakeliga is also seeking to challenge the definition of “property practitioner” according to the new act.

He says this is “overly broad”. According to the new definition, this extends beyond estate agents and now also includes property developers, property administrators, landlords, direct sellers of fixed property, bond originators, and auctioneers.

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An estimated 40 000 fidelity fund certificates are in issue, with only 12 000 of these to previously disadvantaged individuals. Another estimate puts the number of employees from previously disadvantaged backgrounds at about 30% of the industry. For principals, that number is closer to 20%.

The PPRA replaced the Estate Agency Affairs Board in 2022, and the Property Practitioners Act 22 of 2019 widens considerably the definition of a ‘property practitioner’, and therefore who needs to be registered.

This article was republished from Moneyweb. Read the original here