Big fight looming over South Africa’s property laws

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South Africa’s property sector is at the centre of a critical legal challenge as business interest group Sakeliga seeks to overturn aspects of the Property Practitioners Act of 2022.

The organisation argues that this law imposes harmful regulatory overreach and unjustifiably enforces Broad-Based Black Economic Empowerment (B-BBEE) compliance on businesses within the sector.

Sakeliga said the case, if successful, could have far-reaching implications for thousands of businesses and their clients, potentially restoring their freedom to operate without mandatory BEE certification.

The roots of this legal challenge stem from changes implemented by the Property Practitioners Regulatory Authority (PPRA) in April 2024.

These changes required property practitioners to achieve a minimum BEE compliance score of Level 8, or 40 points, as a condition for obtaining Fidelity Fund Certificates (FFCs).

These certificates are essential for property practitioners to operate legally.

Previously, businesses needed only to possess BEE certificates without strict compliance mandates.

The new policy marked a decisive enforcement shift, threatening non-compliant businesses with exclusion from the industry.

This heightened enforcement provoked a backlash, culminating in Sakeliga’s intervention.

In September 2024, the organisation secured a significant victory when the PPRA reversed its enforcement policy and resumed issuing FFCs regardless of BEE compliance.

While this marked a temporary respite for property practitioners, Sakeliga noted that the underlying legislation remained unchanged, leaving the door open for future overreach.

At the heart of the dispute is the Property Practitioners Act’s broad definition of “property practitioner.”

When the Act replaced the Estate Agencies Affairs Act in 2022, it expanded the term to encompass a wide array of roles, including estate agents, property developers, lessors, management agents, homeowners associations, bond originators, and auctioneers, among others.

This sweeping categorisation has drawn criticism for entangling diverse entities into a web of costly and burdensome compliance requirements, which Sakeliga argues undermines their ability to create value for themselves and their communities.

Sakeliga’s court case seeks to address two key issues
First, it challenges the overly broad definition of “property practitioner” under Section 1 of the Act.

The organisation contends that this definition unjustly extends the legislation’s reach to thousands of businesses and transactions that should not fall within its scope.

By narrowing this definition, Sakeliga aims to free many businesses from regulatory obligations that it deems excessive and unwarranted.

Second, Sakeliga is targeting Section 50(a)(x) of the Act, which links the issuance of FFCs to the possession of BEE certificates.

The organisation argues that this requirement serves no legitimate government purpose and violates constitutional principles.

It asserts that the primary purpose of an FFC is to ensure that property professionals handle client funds diligently and ethically.

Requiring BEE compliance, it claims, is unrelated to this purpose and represents an improper imposition on businesses.

Sakeliga maintains that participation in BEE should remain voluntary and that businesses opting out should not be forced to allocate resources to irrelevant compliance measures.

By seeking to have these provisions declared unconstitutional and invalid, Sakeliga aims to create a more equitable and business-friendly environment within the property sector.

The organisation believes that removing these burdensome requirements will benefit businesses and enhance economic activity, ultimately improving living standards across affected communities.

While businesses and clients have found ways to navigate the challenges posed by the Act, Sakeliga argues that state interference has exacted a broader societal cost in the form of reduced economic opportunities and lower standards of living.

As the case progresses, it has the potential to set a precedent not only for the property sector but also for other industries subject to similar regulatory challenges.

Source: https://businesstech.co.za/news/trending/807186/big-fight-looming-over-south-africas-property-laws/