Court strikes down ‘inconsistent and invalid’ BEE licensing in property sector

Lobby group Sakeliga has secured a major legal victory against strict black economic empowerment (BEE) laws in the property sector after the North Gauteng High Court declared unconstitutional the requirement that estate agencies and other property businesses possess a BEE certificate to obtain permission to operate.

Sakeliga took the matter to court in 2024 after the Property Practitioners Regulatory Authority (PPRA) refused to issue operating licences – formally called Fidelity Fund Certificates (FFCs) – to businesses unless they met certain BEE requirements.

Operating without this certificate is a criminal offence.

Read: State sued over estate agent BEE plan

The initial dispute was not over the need for a BEE certificate, which has been part of the Property Practitioners Act (PPA) in Section 50(a)(x) since 2022.

Instead, it related to BEE compliance in that the regulator announced in 2024 that it would not issue an FFC unless a compliant BEE certificate accompanies the application.

The accepted level of compliance was stated as 40 points or more (BEE Level 8).

“You will not be issued a BEE certificate if you score below 40 (making your BEE certificate non-compliant),” the Property Practitioners Regulatory Authority was quoted as saying at the time.

Although the regulator walked back on requiring Level 8 broad-based black economic empowerment (B-BBEE) certificates with new FFC applications last year, Sakeliga continued to challenge the validity of the rules as a whole.

Read:
Blow for state over BEE requirement for estate agents
Regulator quietly ditches plan requiring BEE for fidelity fund certificates

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In its papers, the lobby group argued that the FFC is concerned with the regulation and protection of consumers in the conduct of property-practitioner business, while possession of a BEE certificate “bears no rational relationship to those purposes”.

It labelled the requirement as an irrational barrier to estate agents and businesses in the property sector and argued that it should not be a valid precondition for economic participation or for serving customers, clients, and communities.

Part of the pushback by the PPRA (as the first respondent in the matter) was that Sakeliga’s challenge was misdirected because Section 50(a) contains 10 disqualifications, of which only Paragraph (x) is attacked, while provisions such as the requirement for a valid tax clearance certificate remain unchallenged.

Other respondents included the ministers of human settlements, water and sanitation, and trade, industry and competition.

Ruling

In the judgment handed down this week, Judge Elmarie van der Schyff said the difficulty is not merely one of “interpretative complexity”.

The judge said Section 50(a)(x) makes possession of a “valid BEE certificate” a condition for the issue of a Fidelity Fund Certificate, but that neither the PPA nor the applicable statutory framework identifies with reasonable certainty what document is required, from whom it is required, or what substantive standard must be satisfied for the document to be “valid”.

Therefore, in the court’s order Section 50(a)(x) of the Property Practitioners Act was declared inconsistent with The Constitution and invalid.

“The first respondent may not refuse to issue a Fidelity Fund certificate solely by reason of s 50(a)(x) of the Property Practitioners Act 22 of 2019,” Van der Schyff added.

Essentially, the court said while the objective of the rules is evident, the text does not determine the mechanism chosen to advance it.

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Definitions

The court also partly agreed with Sakeliga that the definition of “property practitioner” in the act is irrational and overbroad.

The ruling declared certain elements of it unconstitutional.

This means private owners, certain advertisers, and persons dealing with specified property interests outside the ordinary course of business are no longer regarded as “property practitioners”.

“The constrained definition means that several categories of persons engaged in property-related business now justly enjoy freedom from the government’s overreach,” Sakeliga said in a statement on Thursday.

“Sakeliga obtained significant relief against this overreach, but not the full narrowing of the definition sought. We are assessing further legal options.”

Since the judgment concerns findings of unconstitutionality of an act of parliament, it will be referred to the Constitutional Court for confirmation.

On confirmation, parliament will have 24 months to correct the defects.

The PPRA was ordered to pay costs, including the costs of two counsel.

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