Understanding the Property Practitioners Act and BEE requirements

Understanding the Property Practitioners Act and BEE requirements

Understanding the Property Practitioners Act and BEE requirements

Recently the South African property sector has been shaken up by new legislation. The Property Practitioners Act 22 of 2019 was signed into law by our president Cyril Ramaphosa during September 2019.

This Act replaces the Estate Agency Affairs Act 112 of 1976 which was only applicable to estate agents.

This new Act will govern all property practitioners, such as the following:

  • Estate agents;
  • Managing agents;
  • Rental agents;
  • Business / Property brokers;
  • Providers of bridging finance;
  • Bond brokers;
  • Property valuers;
  • Developers.

With one of the primary purposes of the Property Practitioners Bill being the transformation of the property market, allowing for the inclusion of historically disadvantaged individuals through the provision of grants for several purposes, we will only address the Broad-Based Black Economic Empowerment (B-BBEE or BEE) certificate requirements for purposes of this blog.

BEE certificate requirements for property practitioners act

Section 50(a)(x) of this new Act requires all property practitioners to be in possession of a valid BEE certificate in order to renew their Fidelity Fund Certificate (FFC). You will therefore not be able to practice in South Africa without a valid BEE certificate.

There is a specific property charter within the B-BBEE codes. This means that property practitioners will not be evaluated under the general charter codes but are subject to additional requirements and thresholds.

Automatic Recognition Levels (ARLs) for business categories

The good news is that Estate Agents and Brokers with a turnover of below R2,5 million per annum (known as an Exempted Micro Enterprise or EME) and less than 51% black owned, shall automatically qualify for a level 4 BEE certificate. However, once they exceed the R2,5-million threshold, a scorecard evaluation on the 5 elements will be required.

Property Valuers and Property Managers are subject to a higher EME threshold of R10 million per annum to automatically qualify as a level 4.

In previous blogs, named 'Important tips on BEE verification' and 'Back to basics with BEE' we already discussed the B-BBEE verification process in more detail. 

Ownership structuring as an alternative option

The other alternative is to consider implementing an ownership structure. As a 51% black-owned entity, you would qualify for a level 2 B-BBEE certificate up to a turnover of R35 million if you are an estate agent or broker. The automatic recognition threshold for property valuers and managers is R50 million per annum. There are various ways to achieve this and to minimise risk without losing control. You can refer to the following blogs regarding indirect ownership:

The BEE certificate requirement should not be viewed with a doom and gloom attitude. This is an opportunity to make a difference in the future of South Africa. Once  businesses participate in the BEE process, many find that they can grow their businesses and that the advantages far exceed the costs of complying.

The positive outcomes of B-BBEE compliance

People often have a negative perception of the impact of B-BBEE or BEE which, in reality, produces a number of positive outcomes:

  • Thousands of unemployed people have had learnership courses sponsored;
  • Tertiary education costs are covered for individuals who completed their degrees but had outstanding fees and could therefore not graduate and be employed in their field;
  • The Youth Employment Services (YES) programme has created in excess of 20 000 jobs for previously unemployed South Africans in the last year;
  • Many black-owned businesses have also become economically sustainable, offering job opportunities to staff.

In conclusion

SERR Synergy has to date assisted an excess of 5 000 businesses in setting up indirect ownership structures. As South Africa’s leader in ownership structures, we urge you to speak to one of our advisors for more clarity on the BEE codes and requirements. We encourage our clients and other impacted businesses to contact us for specific guidance on how BEE legislation is likely to affect them.

About the author: Duncan Cloete has been the Pretoria Corporate Marketing Manager at SERR Synergy since 2017. Starting his career in the automotive industry, he worked his way up from sales executive to dealer principal where he was involved both strategically and operationally in sales, marketing and client satisfaction. His previous involvement with B-BBEE verification added to his broad spectrum of B-BBEE knowledge. With more than 5 years’ service at SERR Synergy in the B-BBEE environment, he has consulted with thousands of business owners ranging from small start-up companies to large international entities seeking solutions to their B-BBEE challenges.

Sources: https://www.gov.za/documents/property-practitioners-act-22-2019-3-oct-2019-00008

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