FREE TRADE vs TRANSITION
(PPRA vs Sakeliga – Fidelity Fund Certificates)
Written by Sulize Möller, Director
Last year saw some upset amongst those in the property industry with certain changes brought about by the Property Practitioners Regulatory Authority (PPRA). The Authority had taken a decision to insist on compliant B-BBEE certificates being produced by property practitioners before a Fidelity Fund Certificate would be issued to the practioner. Following the decision, Sakeliga, a non-profit organisation headed up by CEO, Piet Le Roux, announced that they were preparing to take the PPRA to court as a result of the implementation of the requirements which they deemed both harmful and unlawful.
For the sake of clarity, it is important to note the difference between a valid B-BBEE certificate and a compliant one. A valid certificate denotes that the certificate is current and issued by the relevant recognised authority. A compliant certificate, signifies that the property practitioner meets the required standards set out by the Broad Based Black Economic Empowerment Act (i.e. that the business has achieved a high enough score to be considered compliant in respect of the transformation goals.)
On the other hand, a Fidelity Fund Certificate (FFC) is issued to property practitioners who receive funds from clients and are, therefore, obligated to manage a trust account. The certificate serves as security to the public that the property practitioner will handle the monies of the client with the necessary care and manage it ethically.
According to Sakeliga, a practitioner does not need to be B-BBEE compliant in order to do that.
After consulting with their legal advisors, the PPRA in August 2024 released a decision taken by its Board advising that the term ‘valid’ in the context of the BEE certificates did not imply ‘compliant’ and confirmed that it would only require industry participants to submit valid certificates.
Nevertheless, Sakeliga is still preparing to go to court and, as far as court cases go, this is going to be one that those in the property industry are going to want to keep a close eye on.
Sakeliga aims to challenge the Property Practitioners Act of 2022, on the basis that certain sections of the Act and the Regulations thereto are unconstitutional and therefore invalid. In and amongst other matters, Sakeliga intends on addressing the following, namely:
- Definition of the term ‘property practitioner’ which, according to the broad spectrum provided by the Act, includes all manner of property industry participants (seemingly also private sellers concluding single transactions);
- The issue of Fidelity Fund Certificates only being issued where valid B-BBEE certificates can be produced: Sakeliga contends that even this is an over-reach of political power trying to control private business structures.
According to our research, this case will be the first in which the definition of the term ‘property practitioner’ will be challenged head-on. Several cases exist where the courts have had to determine whether or not the term found application to a certain set of facts, but now they will be challenged with determining the validity of the definition itself. The judgement delivered could potentially significantly improve or overly complicate the current position – time will tell.
Got questions? Contact our office to arrange a consultation with one of our experienced conveyancers on 035 792 2011.