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Pillars of Justice

Property Council Issues Warning to Estates and Gated Communities in South Africa

The National Property Practitioners Council (NPPC) has addressed ongoing concerns regarding profit-making practices by Homeowners Associations (HOAs), emphasizing their illegality as stated by the Minister of Human Settlements.

As South Africa’s largest property sector trade association, the NPPC comprises organizations representing over 40,000 registered property practitioners across the residential and commercial real estate sectors.

In line with its mission to transform the industry, the Property Practitioners Regulatory Authority (PPRA) recently proposed that all real estate agents meet a Level 8 BEE requirement to qualify for an FFC certificate.

Vuyiswa Ramokgopa, Chairperson of the NPPC, expressed support for the PPRA’s commitment to promoting transformation within the real estate industry. To facilitate this, the NPPC suggested immediate, non-disruptive steps to drive lasting change.

One key issue highlighted by the NPPC is the market access barriers created by certain HOAs’ profit-making practices, which adversely affect many agents, particularly in anti-transformative ways. Ramokgopa noted instances of black agents being excluded from marketing properties in gated communities due to high accreditation fees and other restrictive measures imposed by HOAs.

The NPPC commended the PPRA for already taking action against some of these HOAs. However, Ramokgopa reminded those still involved in such practices of Section 63(1) of the Property Practitioners Act, which deems arrangements where an HOA receives money or benefits for favoring or excluding certain agents as undesirable business practices.

Reinforcing these regulations, the Minister of Human Settlements has also declared these practices undesirable and prohibited.

Earlier this year, the Real Estate Business Owners of South Africa (Rebosa) raised concerns about ongoing profit-making practices by HOAs, which significantly impact both homeowners and estate agents. Rebosa CEO Jan le Roux reported cases where sellers' Rates Clearance Certificates (RCCs) were withheld until the involved agent paid an ‘agreement’ fee, delaying transactions to the estate's advantage. These fees, justified by purported needs like security checks and agent training, range from R5,000 per transaction to 1% of the selling price.

Le Roux affirmed that such arrangements are illegal and that agents are prohibited from participating in them, noting that these practices also negatively impact sellers. High fees may discourage agents from negotiating commission rates, limiting sellers’ options for representation.

At Gerhard Barnard Inc Attorneys and Conveyancers, we are committed to guiding our clients through these challenges and ensuring compliance with legal standards in property transactions.

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