But what happens if a property practitioner has acted without a valid Fidelity Fund Certificate (FFC), and the seller or conveyancer only becomes aware of this when the seller is liable as contracted to pay the commission following registration of the sale in the Deeds Office? More importantly, what recourse does the seller have? How should the conveyancer advise the seller in these circumstances where the property practitioner is claiming commission despite being non-compliant?
The PPA establishes clear obligations for property practitioners regarding remuneration and fidelity fund compliance. Section 56 of the PPA creates an absolute requirement that a valid Fidelity Fund Certificate (FFC) must be held at the time any property practitioner renders a service to claim commission.
In simple terms: no Fidelity Fund Certificate (FFC), no commission.
Practical lessons: When theory meets reality
A recent Property Practitioners Regulatory Authority (PPRA) finding affirms this position and underscores the need for rigorous compliance by both property practitioners and conveyancers.
The PPRA hearing referred to, involving an estate agency firm operating in Hartenbos and Mossel Bay, illustrates the consequences of non-compliance with Section 56 of the PPA and highlights the practical enforcement of the seller’s statutory rights. The hearing demonstrated that estate agents or agencies (property practitioners) acting without a valid Fidelity Fund Certificate (FFC) can face fines and be barred from claiming commission.
Importantly, if a property practitioner does not hold a valid FFC, the seller is not legally obliged to pay any commission. However, if commission has already been paid in contravention of Section 56, the seller retains a statutory right to reclaim it under Section 48(4) of the PPA. This provision allows the seller, or another relevant party, such as another estate agent, to submit a written request to the practitioner for repayment.
In the PPRA hearing, the owner of the two properties sold found himself caught in the middle of conflicting instructions relating to the payout of the commission, and out of desperation over how the commission was to be paid, and inconsistencies with the contracts, he approached the PPRA to lodge a complaint.
The context of the case involved four agents and the principal of the agency, who were fined following a commission dispute about two properties sold. Conflicting instructions, internal tensions within the agency, and transactions conducted without proper compliance triggered the PPRA investigation. Key findings revealed that one individual acted as an agent without a valid FFC and unlawfully claimed a portion of the commission. The directors and the principal of the agency were found to have permitted an unregistered agent to act as an agent (unlawfully).
Sanctions imposed included a fine of R15,000 payable over six months for the individual who acted unlawfully as an agent, while the three directors and the principal of the agency were fined R25,000 each payable within three months from the date of the order.
Section 56 of the PPA is more than theoretical. The recent PPRA hearing demonstrates that individuals or agencies who act without a valid FFC expose themselves to regulatory fines and the forfeiture of any contracted entitlement to commission. Sellers remain protected through statutory recourse and have the right to withhold payment or reclaim commission paid in contravention of the law, while conveyancers act as a final safeguard in exceptional cases, ensuring that commission is only released in compliance with Section 56. This case highlights how legal obligations are applied in practice, emphasising diligence, verification of FFCs, and the protection of sellers’ rights.
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