Following a proclamation notice on 14 January 2022, President Cyril Ramaphosa has declared 1 February 2022 as the date that the Property Practitioners Act 22 of 2019 (PPA) will come into operation. Find the proclamation notice Here:
Information and Implications
Accountants should consider a change in accounting policy for the recognition of revenue by property practitioners. Although not always enforced, it was common practice among estate agents to include a clause in the sale contract stating that, should the sale be cancelled for whatever reason, the commission is still payable to the agency. In terms of the PPA, this is no longer allowed. Commission is only allowed to be collected upon registration of the property.
The PPA allows for property practitioners with an annual turnover of less than R2,5 million to select an independent review of their business financial statements instead of an audit. Where the property practitioner trades as a company, the Companies Act 71 of 2008 should, however, also be considered. In terms of the Companies Act, a company holding fiduciary assets that exceeded R5 million at any point in time during the financial year will have to be audited. The decision to have the financial statements independently reviewed instead of audited should thus be carefully considered in terms of all laws and regulations affecting the entity.
More specific requirements have been added to the PPA in prescribing the requirements of accounting records to be maintained by practitioners, for example client mandates and advertising material.
Compliance with the PPA will be monitored by inspectors. Practitioners found to have breached the PPA can be liable for a fine of up to R200 000 or a maximum sentence of 10 years’ imprisonment.
Context for the beginner
Before the Property Practitioners Act (“PPA“), the real estate industry was regulated by the Estate Agencies Affairs Act (“EAAA“). The EAAA regulated all things to do with property and estate agency. However, following the changes in time and practice, the EAAA became inadequate to regulate the real estate industry. The EAAA also did not regulate or cater to transformation within the industry. The PPA therefore repeals the EAAA in its entirety. The PPA was signed into law in 2019 but did not come into effect immediately. The date has however been set by the President and the PPA will commence on 01 February 2022. Along with the commencement of the PPA are accompanying regulations (the “PPA Regulations“).
The intention of the PPA is to provide for the regulation of property practitioners and repeal the Estate Agency Affairs Act 112 of 1976 in its totality and does not intend for the continuation of the Estate Agency Affairs Board but will henceforth be known as the Property Practitioners Regulatory Authority (PPRA) whose functions will include specific Consumer Protection, Consumer Education and the transformation and regulation of the industry, and furthermore provides for the governance of the Regulating Authority to promote a framework for property practitioners.
To download the PPA click Here.
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