Residential estates may not impose ‘marketing’ fee on estate agents – high court

The High Court in Johannesburg has reaffirmed that residential estates and communities may not charge or impose a fee on estate agents who wish to market or sell property within such communities.

The court last week dismissed with costs an application by the Residential Communities Council and the Association of Residential Communities against the Minister of Human Settlements, the Property Practitioners Regulatory Authority (PPRA) and the National Property Practitioners Council.

Listen/read: Alert on residential property market scams

The application was for an order declaring that this is not an ‘undesirable business practice’ prohibited by certain provisions of the Property Practitioners Act (PPA).

Minister of Human Settlements Thembi Simelane and the PPRA welcomed the judgment.

Simelane said it represents a significant development in the ongoing debate concerning fees imposed on property practitioners by residential estates as a condition for marketing and selling properties within their developments.

The minister said the judgment also reinforces the importance of examining practices in the property market against the objectives of the legislative framework.

These objectives include fair access to the market, consumer protection and the transformation of the property sector.

Simelane said the dismissal of the declaratory order application enables the department, through the PPRA, to continue advancing for a fair, transparent, and inclusive property sector in which property practitioners can operate within the law and consumers are afforded appropriate protection.

ADVERTISEMENT

CONTINUE READING BELOW

Regulator ‘keenly aware of the prejudice’

PPRA CEO Thato Ramaili said the authority has been keenly aware of the prejudice suffered by property practitioners and consumers whose rights to operate freely or to appoint a property practitioner of their choice were severely curtailed by this practice.

Ramaili said this was recognised by the court, which also referred to the invidious position of the property practitioner who pays the fee to become accredited with a community scheme only to fall foul of serious sanction by the PPRA, which is obliged to enforce the provisions of the act.

Read:
State sued over estate agent BEE plan
Blow for state over BEE requirement for estate agents
Court strikes down ‘inconsistent and invalid’ BEE licensing in property sector

She said the PPRA applauds the court ruling and regards it as a triumph for consumer rights, equal access to work opportunities for all property practitioners and, most significantly, transformation in the property sector.

Application

Acting Judge NS Krüger said when handing down judgment the applicants allege the respective estates are governed by their homeowners’ associations, body corporates and/or governing bodies according to the will of their members and consistent with their memorandum of incorporation or constitution, together with its rules and regulations.

Krüger said the applicants represent some 181 residential estates, each of which may or may not fall within the definition of ‘property practitioner’, at least relating to whether or not they manage the respective estates for gain, or in any other sense set out in the definition.

“I find no exposition in the applicants papers from which it may be established whether the homeowners’ associations, body corporates or governing bodies referred to fall outside the ambit of the definition of ‘property practitioner’ … of the PPA, and more pertinently whether they are excluded from managing their respective properties for gain or profit.”

ADVERTISEMENT:

CONTINUE READING BELOW

Krüger added that the order sought was framed in general and very broad terms, and the nature of the contested conduct was not adequately specified, in particular as regards the nature of the fee and in what circumstances it is demanded.

Defending the conduct

A letter dated 28 March 2023, addressed to the PPRA by the management agent of the Residential Communities Council, was attached to the founding affidavit.

Krüger said among other things, it defends the contested conduct by asserting that it is not an accreditation fee that disadvantages any property practitioner who wishes to be active in any estate.

The letter alleged that there are two broad reasons for property practitioners to be registered with a homeowners’ association:

For security reasons, and
To ensure that a prospective purchaser or tenant is fully aware of the rules and policies of the relevant homeowners’ association.

Krüger said it states that as a general rule, the administrative fee charged by the homeowners’ association will be an all-inclusive fee for, among others:

Offering the opportunity to place adverts on the website;
Covering the costs of deploying additional security to handle increased traffic for visitors on show days;
Keeping a record of properties rented out; and
Dealing with any inquiries that property practitioners may have relevant to any sale.

But Krüger said the nature of what is termed an administration fee differs from estate to estate, commensurate with the services provided.

ADVERTISEMENT:

CONTINUE READING BELOW

‘Additional income stream’

The PPRA claimed the fee as alleged by the applicants is merely “a fig leaf in an attempt to circumvent the strict provisions of the undesirable practice the PPA seeks to prevent and its effect is to undermine the declared purpose of the PPA”.

Krüger said in truth and in fact, so the argument goes, it is nothing more than an additional income stream for the residential estates to the detriment of property practitioners who elect not to comply with the demand for payment of the fee or charge as well as previously disadvantaged property practitioners.

Read: Pros and cons of private selling laid bare

“Depending on the exact nature in the case of each residential estate, the disputed conduct may not be to the benefit of sellers, potential purchasers and may well restrain growth in the property sector not only as regards the volume of sales, but also entry into the market by prospective property practitioners, and in particular those previously disadvantaged.

“Depending on the individual circumstances, such conduct may well be unjustifiable and is exactly the mischief, having due regard to the context of the PPA and regulations, which the authorities seek to curtail.”

Krüger said it appears that property practitioners who comply with the contested conduct, by paying the fee or charge demanded, may well fall foul of the undesirable business practice the PPA and regulation seeks to sanction.

“I am not persuaded that the applicants have made a case for an order, framed as it is, in respect of every homeowners’ association, body corporate or governing body country wide, nor in respect of its members.”

#Residential #estates #impose #marketing #fee #estate #agents #high #court