ESTATE AGENCY AFFAIRS BOARD

Presentation to Arello 2014:

Presented by Bryan Chaplog CEO of EAAB

History of the EAAB

Functions of the EAAB

Challenges in the sector

Enforcement Activities and Penalties

TABLE OF CONTENT

The Estate Agency Affairs Act was promulgated in 1976 due to

- Large scale mismanagement of trust monies by estate agents

- Unethical behavior of Estate Agents - Consumer complaints - Self- regulation did not work - Government needed to intervene and regulate

HISTORY

The EAAB Act provides for the establishment of a 15 member Board as follows: 5 Members from the real estate sector; 5 Members from consumer interest; 5 Members from professional fraternity;

The EAAB is operationally run by a CEO supported by an Executive Management team;

The staff compliment is 85 staff operating from a centralised office;

Opening regional offices in major provinces

STRUCTURE AND RESPONSIBILITIES

Primary Mandate of EAAB Regulate, maintain and promote the standard of conduct of estate

agents having due regard to the public interest; Issue fidelity fund certificates to qualifying applicants; Prescribe the standard of training of estate agents; Investigate complaints against estate agents and institute disciplinary

proceedings against offending estate agents where required; and Manage and control the Estate Agents Fidelity Fund.

Secondary mandate The EAAB is the Supervisory Body of the estate agency profession

pursuant to the Financial Intelligence Centre Act and is obliged to take all steps required to prevent; alternatively, identify and report on, anti-money laundering and terrorist financing activities

Expanded Mandate Title deed restoration project; Transformation of the Real Estate Sector;

STRUCTURE AND RESPONSIBILITIES

The EAAB issues licenses to Estate Agents to legally operate in some sectors

WE REGULATE

SectorsReal Estate - residentialReal Estate - commercialReal Estate - agriculturalBusiness Brokers – selling of business ChallengesTime share ChallengesProperty management ChallengesShopping centers / Mall ManagementResidential rental / commercial leasesHoliday Letting ChallengesSheriffs, Mortgage Originators, Bridge financing New Act

The EAAB issues licenses to Estate Agents to legally operate in the sector

FIDELITY FUND CERTIFICATES

FY 08/09 FY 09/10 FY10/11 FY11/12 FY12/13 FY13/1446000

47000

48000

49000

50000

51000

52000

53000

54000

55000

56000

52423

50422 49981

52304

55232

49726

FINANCIAL YEARS COMPARISONS

Financial Years

Total FFC

The EAAB issues licenses to Estate Agents to legally operate in the sector

FIDELITY FUND CERTIFICATES CONT/…

Financial Year 13/14 Fidelity Fund Certificate StatisticsStatus NumberAttorney 89CC 4123Partnership 108PTY 2274Sole Proprietor 2203Full Status 14501Intern Estate 15671Principal 10757Total 49726

The EAAB has been appointed as the Professional Body for the real estate sector through the South African Qualifications Authority (SAQA).

We issue professional designations- Professional Practitioner in Real Estate (PPRE)- Master Practitioner in Real Estate (MPRE)- Chartered Practitioner in Real Estate (CPRE)

EAAB IS THE PROFESSIONAL BODY OF THE REAL ESTATE SECTOR

- We have an internal Inspectorate made up of lawyers and accountants- We have sign-up 13 external audit firms to

perform compliance inspections nationally- We aim to inspect 6000 firms over a 5 year

period- We include money laundering procedures in

audit

Challenges in the SectorEAAB DOES 100 COMPLIANCE INSPECTIONS

PER MONTH IN REAL ESTATE SECTOR

INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013 GAUTENG KWAZULU

NATALWESTERN

CAPE

Estate agencies operating illegally 97 86 5

Principals with no valid Fidelity Fund Certificates 103 131 29Non- principal & interns with no valid Fidelity Fund Certificates

106 310 37

Primary trust account operated in contravention to the EAA Act

253 210 50

Secondary and investment account operated in contravention to the EAA Act

86 88 16

Interest earned on trust monies - not properly dealt with

67 10 9

Retention of trust monies & payment from trust account in contravention to the EAA Act

58 16 5

Insufficient accounting records of trust account 158 65 25Improper admin of trust account 189 65 17Accounting Records improperly maintained 471 188 51Contracts completed by unqualified persons 52 21 16

INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013 GAUTENG KWA ZULU

NATALWESTERN

CAPE

Contravention in respect of contract generally 90 104 15Contravention in respect of sole mandates 89 20 15Contraventions in respect of lease agreement 66 68 22Contraventions in respect of sale agreement 72 22 21Cessation of practice without notifying the EAAB

77 21 7

Non-existent estate agencies 40 16 0Non-compliance with FIC act in respect of Duty to identify clients & keep records

166 19 32

Non-compliance with FIC Act i.r.o. Cash & Electronic Transaction exceeding R25 000

50 18 7

Non-compliance with FIC Act i.r.o. internal rules

241 56 21

TOTAL CONTRAVENTIONS TO THE ESTATE AGENCY AFFAIRS ACT

2530 1534 400

We have Home Owners Associations and Gated Communities forcing estate agents to

- Pay “accreditation fees to start selling properties in gold estates, security estate e.g. “Oscar Pistorius estate”

Between $1500 - $20000 per year HOA’s forcing sellers to pay % of selling price to

the HOA as levy Estate agent has to pay % of commission to HOA Penalties for not using HOA “accredited agents” Creating rules in the registration of title deeds

and HOA rules

Challenges in sector

In Constitutional Court facing challenge on our search and seize rights vs right to privacy constitutional rights. Auction industry

Ghost Bidding in Auction Industry Paying out claims for actions of unlicensed estate

agents Trust account mismanagement in the property

management sector Fight between liquidator and Curator over

monies in the trust account

Challenges in sector

New Act being finalised Partnership: external audit firm regulatory bodies Online submission of audit report of the estate

agents by their own Audit firms Blocking of Firms if audit reports not received eg

4800 firms in 2013 i.e. 45% of firms Immediate production of charge letters based on

contraventions raised on online audit report Auditors has to report on unlicensed trading and Trust/ business account mismanagement Illegal trading Training of audit firms available Working with HOA representative bodies to agree

on better practices

Solving Challenges in sector

We have Disciplinary Committees chaired by an Advocate/Lawyer support by 2 Estate Agents

Summon the Complainant and Estate Agent Make a ruling that is binding New Act will make committee like a court

A Reprimand Fine of up to $2500 per count Withdrawal of license Appointment of a Curator Bonis Take over business and bank account Process with further legal action

Enforcement and Penalties

Overall Performance of Claims The Board has received claims from consumers that has

suffered pecuniary loss at the hands of unscrupulous estate agents;

The new bill will strengthen the recovery process of these amounts from the guilty estate agents as the current legislation is lacking in this process.

STATISTICS OF NEW CLAIMS AGAINST THE FUND

Claims Statistics ($) 31 Mar- 14 31 Mar-13 31 Mar-12Value of claims lodged 1 044 733 235 220 1 050 233

Claims approved 486 652 28 860 380 366Value of claims rejected 407 782 38 900 258 822Claims pending 150 298 167 460 411 043

The real estate sector currently comprises approximately 10 000 estate agency enterprises.

It is encouraged that each enterprise look at taking on at least one formerly disadvantaged learner as an intern estate agent under their mentorship;

The ultimate success of the programme will, of course, necessarily depend on the collaboration of all stakeholders and role-players within the sector and their acceptance of the urgency of the transformation imperative.

In this regard and the EAAB encourages firms to participate in the programme.

FOCUS ON TRANSFORMATION OF THE REAL ESTATE SECTOR

‘One Learner-One Estate Agency’ Programme

Legislation Review and the Proposed Property Practitioners Bill Cont/…

The Bill with create a legislative environment for the Authority to assist with title deed delivery nationally

The Bill seeks to promote transformation within the Real Estate Sector by requiring that all Practitioners comply with the Property Sector Charter;

It will promote operational effectiveness by ensuring that rulings of the Authority are equivalent to Magistrate court orders or rulings;

The new bill is aligned to all the recent court rulings affecting the real estate sector;

Only pay claims for lisenced estate agents

Thank you