New property sector legislation overlooks transformation

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Business Day has a recent version of the Property Practitioners Bill of 2016, which repeals the Estate Agency Affairs Act of 1976. The Bill has been through many drafts over the past few years. Some property professionals say excessive regulation is the biggest barrier to transformation.

The version Business Day has seen contains only this paragraph with respect to transformation: "The Property Sector Transformation Charter contemplated in Section 9 (1) of the Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003), applies to all property practitioners." The charter, which is long overdue, is also expected to be published this year.

Several estate agencies and industry bodies contacted about the Bill said they couldn't comment accurately until a final bill had been published, but they had noted Cabinet's announcement that this was imminent.

Cabinet said last week that the Bill would be published in the Government Gazette for public comment in the next few weeks. Cabinet said that the bill "responds to the changing market conditions and dynamics, strives to create an enabling environment to enhance economic activity within the real estate market ... [and] addresses the need to enhance compliance and enforcement, as well as ensure transformation in the sector and to regulate the conduct and behaviour of property practitioners".

Seeff Properties chairman Samuel Seeff said an update to the old Estate Agency Affairs Act had been needed for years. "The industry most certainly welcomes the new Bill and it is anticipated that it will provide a much-needed shift in the industry, largely towards a more professional approach," he said. "Many of the regulations around professionalising the industry are already in practice, at least insofar as the bigger agencies are concerned."

He added: "Given that the previous Estate Agency Affairs Act dates back to 1976, it certainly needed to be updated. While the new Bill is welcomed, we understand from the provisional drafts that there are some elements we believe need to be refined - proposals around transformation targets and how these may conflict with the new requirements and nature of the industry, for example. We would, however, need to wait for the Bill to be gazetted before we can provide meaningful comment."

The South African Property Owners Association said it had not yet received the bill and could not comment on it.

Barriers to entry

In 2014, the Estate Agency Affairs Board said it was hoping a 12-month-long internship programme would boost transformation in the estate agency industry. Only about 10% of SA's 40,000 or so agents are black.

While all SA's major estate agencies have implemented the programme, some of the fundamental characteristics of the sector mean it can take a long time to achieve transformation.

"People struggle to enter the estate agent sector because it is commission-and not salary-based. This means they have to have savings before entering the industry in order to sustain a living until they sell their first property," the board's CEO, Bryan Chaplog, said at the internship programme's launch in 2014.

It costs about R10,000 and takes a year to train an estate agent. The process includes a qualification course and board exam. A second exam has to be taken for an agent to start their own licensed real estate business.

Jan le Roux, CEO of the industry body Real Estate Business Owners of SA, said this week that these exams and other costs and regulations had actually stifled transformation in the sector, with the industry over-run with regulation.

"The regulation implemented over the past few years has, in many ways, slowed transformation. Many of the tests are very easy and merely act as a way in which officials are able to collect funds," he said. "Many potential black estate agents would rather work in other industries with lower barriers to entry. Currently, mostly large agencies are able to handle all the regulations for their new agents but we don't see many new [black] entrepreneurs starting their own agencies."

Source: BDpro