This article is Part 2 in our Claiming Commission series
Last week, we discussed the case of Bianca Properties (Pty) Ltd v Matseba Mogomana. The property practitioner (PP) in this case, was working without a FFC, sold three properties and then the agency refused to pay the PP their share of the commission.
The court in this case was quite clear, no FFC, no claim for commission!
It is interesting to understand the differences between the requirements of the Estate Agency Affairs Act 112 of 1976 and the Property Practitioners Act 22 of 2019 relating to claiming commission.
Estate Agency Affairs Act 112 of 1976
Section 26 of the Estate Agency Affairs Act said that you cannot act as an estate agent without a valid FFC. Section 34A of the same act said that an estate agent is not entitled to remuneration unless at the time of performance of the act, a valid FFC had been issued to that person.
In the most interesting case of Taljaard v Botha Properties, Botha Properties sold a property in terms of a mandate given to it by Taljaard, the seller. At the time the agreement of sale was concluded, a FFC had not been issued to Botha Properties in terms of the Estate Agency Affairs Act 112 of 1976 (this case happened in 2008 prior to the introduction of the Property Practitioners Act 22 of 2019). The agency was paid its commission, but the seller was of the opinion that the mandate was not valid, due to the agency not holding a valid FFC and the seller claimed return of the commission that had been paid to the PP.
The judge was of the opinion, that if the Estate Agency Affairs Act required repayment of commission by the PP back to the seller, in the instance indicated above, then the legislation would expressly say so. The judge went on to say that Section 34A does not invalidate the contract of mandate of an estate agent who acts in conflict with Section 26. In other words, a PP who acts without a FFC is acting illegally and is not entitled to commission. This means, that if the seller has not paid the PP their commission, then they are not legally required to do so. However, if the PP has been paid their commission already, then the PP is not required to give the commission back to the seller, as not holding a valid FFC does not invalidate the mandate, in terms of which, the seller is responsible for payment of commission to the PP.
The judge said, “Had it (Section 34A) been intended to confer a right of action upon a client for recovery of moneys that became contractually due it would have been a simple matter to do so in express terms” – meaning that the Act would say so – you are not entitled to keep the commission, so give it back to the seller!
Hence, the PP was entitled to keep the commission paid, in this case.
Property Practitioners Act 22 of 2019
We know that the Estate Agency Affairs Act 112 of 1976 has been repealed and replaced by the Property Practitioners Act 22 of 2019. What does the Property Practitioners Act (PPA) have to say:
- Section 48(1) of the PPA says that no person or entity may act as a PP unless they have been issued with a FFC.
- Section 48(3) says that any person who does not comply with Section 48(1) is guilty of an offence.
- Of great importance, is Section 48(4) which says, any person who acts without a FFC, must when requested, repay any money received as a result of a property transaction whilst acting without a FFC. Any person who does not comply with Section 48(4), is guilty of an offence.
- Section 56(1) says that a PP is under no circumstances entitled to remuneration unless they are in possession of a Fidelity Fund Certificate (FFC).
The deficiency in Section 34A of the Estate Agency Affairs Act, pointed out by the judge in Botha v Taljaard Properties has therefore been amended by Section 48 of the Property Practitioners Act.
In simple terms, a PP may not act with a valid FFC. If a PP acts with a valid FFC, any commission earned as a result, must be paid back to the client. The mandate signed by the client and the PP will be of no consequence. Quite simply, no FFC, no commission and if you have been paid your commission, then you need to give it back to your client. So, make sure you have a valid FFC!
What happens if I have applied for my FFC and the PPRA has not issued it timeously?
This has become a very topical issue with a lot of discussion on social media of late.
It is important for PPs to be aware of Section 49 of the Property Practitioners Act, which says as follows:
Mandatory time periods for issuing certificates
- (1) The Authority must, within 30 working days, consider any application
submitted to it in terms of this Act, which fully meets the prescribed requirements,
unless the Authority, on good grounds in writing, informs the applicant of the reasons
why that period is to be extended, provided that such extension may not exceed 20
working days.
(2) The period of 30 working days contemplated in subsection (1) commences afresh
if the Authority requests the applicant to submit additional information or to correct the
said application.
(3) If the Authority has failed to comply with subsection (1), the application is deemed
to have been approved and the Authority must, upon written request by the applicant
within 10 working days, issue the applicant with the relevant certificate.
Hence:
- S49(1) – the PPRA MUST consider your application for your FFC within 30 working days. This means that if you apply for your FFC, the PPRA needs to issue your FFC within 30 working days. If your application for your FFC does not meet the requirements for the application (let us say that you are missing a document), then the PPRA can inform you, in writing, that the time period for issue of your FFC needs to be extended (presumably to give you time to submit any missing document). The period of extension will be an additional 20 working days.
- S49(2) – if the PPRA requests additional information, then the PPRA has an additional period of 30 days for the issue of the FFC.
- S49(3) – if you make application for your FFC and everything is in order with your application and the PPRA does not issue your FFC within 30 working days, in terms of S49(1), then your application is deemed to have been approved. Importantly, in my opinion, this means, that if you apply for your FFC and the PPRA does not issue it within 30 working days, then you can continue to work as a PP, quite legally, as if your FFC had been issued. I would strongly advise you to keep copies of all your communications with the PPRA relating to your application for your FFC and also you still need to follow up with the PPRA to get your FFC issued, which the PPRA is required to do (in terms of S49(3), within 10 working days). In other words, do not just leave it because you have applied for you FFC and not had a response from the PPRA.
Furthermore, I would suggest making a simple affidavit containing the history of your application. Provide your affidavit together with proof of all your communication with the PPRA and, in my opinion, any conveyancer should then have no reason to withhold any commission owing to you.
In the case of Signature Real Estate (Pty) Ltd v Charles Edwards Properties and Others (415/2019) [2020] ZASCA 63; 2020 (6) SA 397 (SCA) (10 June 2020), also known as Signature Real Estate (Pty) Ltd v Atlantic Seaboard Realty (Pty) Ltd, which was a case dealing with a FFC issued by the Estate Agency Affairs Board, which had a error, Judge of Appeal Magkoka, made the following important point:
“In terms of the Board’s rules, an application for a fidelity fund certificate for the following year must be made not later than 31 October of each year. Signature had complied with this and all other requirements of the Act. But for the error on the part of the Board, Signature was entitled to, and would have been issued with, a valid fidelity fund certificate for the period 1 January-31 December 2018.”
Magkoka JA, goes on to say, “In the present case the purpose of the Act was served. The public would have been protected. If, for example, a member of the public had suffered loss due to misappropriation by an estate agent involved in the agreement in question, the Board, in my view, would have been hard-pressed to argue that a claim against the fidelity fund should not succeed because a certificate had not physically been issued to the wrongdoer at the time of the conclusion of the agreement. Such an outcome would be contrary to the purpose of the legislation.”
It is my opinion that as long as a PP has followed the provisions of Section 49, they:
- Would be entitled to their commission;
- Would not be allowed by a conveyancer from being prevented from being paid their commission; and
- The PPRA would not be able to find such a PP guilty of contravening the Property Practitioners Act 22 of 2019 and its associated Regulations.
Some more interesting case law next week.
You are welcome to email me on graeme@cpmd.co.za
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