PowerPoint Presentation

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 EAABRegulate, 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; andManage and control the Estate Agents Fidelity Fund.

Secondary mandateThe 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 MandateTitle deed restoration project;Transformation of the Real Estate Sector;STRUCTURE AND RESPONSIBILITIESThe EAAB issues licenses to Estate Agents to legally operate in some sectors We regulateSectorsReal Estate - residentialReal Estate - commercialReal Estate - agriculturalBusiness Brokers selling of businessChallengesTime shareChallengesProperty managementChallengesShopping centers / Mall ManagementResidential rental / commercial leasesHoliday LettingChallengesSheriffs, Mortgage Originators, Bridge financingNew ActThe EAAB issues licenses to Estate Agents to legally operate in the sector fidelity fund certificates The EAAB issues licenses to Estate Agents to legally operate in the sector fidelity fund certificates ConT/Financial Year 13/14 Fidelity Fund Certificate StatisticsStatusNumberAttorney89CC4123Partnership108PTY2274Sole Proprietor2203Full Status14501Intern Estate15671Principal10757Total49726The 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 accountantsWe have sign-up 13 external audit firms to perform compliance inspections nationallyWe aim to inspect 6000 firms over a 5 year periodWe include money laundering procedures in auditChallenges in the SectorEAAB DOES 100 COMPLIANCE INSPECTIONS PER MONTH IN REAL ESTATE SECTOR

INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013GAUTENG KWAZULU NATALWESTERN CAPEEstate agencies operating illegally97865Principals with no valid Fidelity Fund Certificates10313129Non- principal & interns with no valid Fidelity Fund Certificates 10631037Primary trust account operated in contravention to the EAA Act25321050Secondary and investment account operated in contravention to the EAA Act868816Interest earned on trust monies - not properly dealt with67109Retention of trust monies & payment from trust account in contravention to the EAA Act58165Insufficient accounting records of trust account1586525Improper admin of trust account1896517Accounting Records improperly maintained 47118851Contracts completed by unqualified persons522116INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013GAUTENG KWA ZULU NATALWESTERN CAPEContravention in respect of contract generally9010415Contravention in respect of sole mandates892015Contraventions in respect of lease agreement666822Contraventions in respect of sale agreement722221Cessation of practice without notifying the EAAB77217Non-existent estate agencies40160Non-compliance with FIC act in respect of Duty to identify clients & keep records1661932Non-compliance with FIC Act i.r.o. Cash & Electronic Transaction exceeding R25 00050187Non-compliance with FIC Act i.r.o. internal rules 241 5621TOTAL CONTRAVENTIONS TO THE Estate Agency Affairs Act25301534400We 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 estateBetween $1500 - $20000 per year HOAs forcing sellers to pay % of selling price to the HOA as levyEstate agent has to pay % of commission to HOAPenalties 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 industryGhost Bidding in Auction IndustryPaying out claims for actions of unlicensed estate agents Trust account mismanagement in the property management sectorFight between liquidator and Curator over monies in the trust account

Challenges in sector

New Act being finalisedPartnership: external audit firm regulatory bodiesOnline submission of audit report of the estate agents by their own Audit firmsBlocking of Firms if audit reports not received eg 4800 firms in 2013 i.e. 45% of firmsImmediate production of charge letters based on contraventions raised on online audit reportAuditors has to report on unlicensed trading and Trust/ business account mismanagement Illegal tradingTraining of audit firms availableWorking 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 AgentsSummon the Complainant and Estate AgentMake a ruling that is bindingNew Act will make committee like a court

A ReprimandFine of up to $2500 per countWithdrawal of licenseAppointment of a Curator BonisTake over business and bank accountProcess 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-1331 Mar-12Value of claims lodged1 044 733 235 2201 050 233Claims approved486 652 28 860 380 366Value of claims rejected407 782 38 900 258 822Claims pending150 298 167 460411 043The 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