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Property Practitioners: To BEE or not to BEE

On the 01st of February 2022, the Estate Agency Affairs Act, Act 112 of 1976 was, in its entirety repealed by the new Property Practitioners Act, Act 22 of 2019 (herein the ”PPA”). The aim of the PPA is to bring about transformation within the property sector. The PPA established the Property Practitioner Regulatory Authority (herein the ”PPRA”), as the new governing body (and replacing the Estate Agency Affairs Board). The PPRA is tasked with transforming the property sector and protect property consumers.

According to the PPA, every Property Practitioner must apply to the PPRA every three years for a valid Fidelity Fund Certificate. No person may act or hold himself out as a property practitioner without being issued with a valid Fidelity Fund Certificate in terms of the PPA. To attain a Fidelity Fund Certificate is nothing new to Property Practitioners, however, the prerequisite to be in possession of a ”valid BEE certificate” is unfamiliar terrain for most Property Practitioners.

The PPA does not specify what a ”valid BEE certificate” entails, however, at this stage one can only assume that it is the certificate indicating the Property Practitioner’s level of contribution towards broad based black economic empowerment in terms of the Broad Based Black Economic Empowerment Act, Act 53 of 2003 (herein the ”BEE Act”) and the Codes to the BEE Act.

It is therefore assumed that meeting the minimum requirements towards broad based black economic empowerment in terms of the BEE Act and the Codes, will be sufficient to meet this requirement. Although, to attain a level 8 BEE certificate (being the minimum level of BEE compliance in terms of the BEE Act), will prove difficult for many property practitioners, especially family-owned agencies and sole proprietors.

In order to attain a level 8 BEE compliance certificate, the property practitioner or agency will have to comply with the BEE contribution targets stipulated in the BEE Act and the Codes. For an estate agency, to attain the minimum level of BEE contribution (i.e. a level 8 BEE Certificate), the estate agency must comply with the target and elements prescribed in the ”Property Sector Code”.

According to the Property Sector Code for BEE, estate agencies with a turnover of below R2.5 million per annum (alternatively an Exempted Micro Enterprise or ”EME”) and with less than 51% black ownership, will automatically qualify for a level 4 BEE certificate. However, most estate agencies will exceed the thresholds for EME’s. Should the R2.5 million threshold be exceeded, the estate agency will be evaluated (for BEE contribution purposes) on a scorecard evaluation in respect of all 5 elements, being Equity Ownership, Skills- and Enterprise Development, Employment Equity, Procurement and Socio-Economic Development.

The alternative, to being evaluated on all 5 elements of the BEE scorecard (which can prove an extremely expensive exercise for most enterprises), would be to consider implementing a black-ownership-structure. Should the estate agency be at least 51% black-owned, the estate agency will qualify as a level 2 BEE contributor (provided of course the turnover remains below R35 million). There are of course various ways in which you can structure the black ownership, without incurring large amounts of debt or completely alienating control.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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