In a significant ruling for property practitioners, the North Gauteng Division of the High Court last week declared section 50(a)(x) of the Property Practitioners Act (‘the PPA’) inconsistent with the Constitution and invalid. As the declaration concerns an Act of Parliament, it has no force unless confirmed by the Constitutional Court. Importantly for property practitioners, however, the High Court granted the industry interim relief: Pending the ConCourt’s decision, the Property Practitioners Regulatory Authority (‘the PPRA’) may not refuse to issue a Fidelity Fund certificate (‘FFC’) solely by reason of section 50(a)(x).
What was challenged?
In Sakeliga NPC v Property Practitioners Regulatory Authority and Others, Sakeliga – a public interest litigation group – challenged several parts of the PPA, including section 50(a)(x). Under the Act, section 50(a)(x) specifies that the PPRA may refuse to issue a FFC to property practitioners who are ‘not in possession of a valid BEE certificate’. Sakeliga contended, among other things, that the requirement creates an unconstitutional barrier to lawful practice and that the legislation does not define or explain what constitutes a ‘valid BEE certificate’. Specifically, Sakeliga argued that the provision violates section 22 of the Constitution, which guarantees one’s freedom to select a trade, occupation, or profession.
B-BBEE compliance and the FFC regime
For property practitioners in South Africa, a FFC is the statutory gateway to lawful practice in real estate. Indeed, section 48 of the PPA expressly prohibits a person from acting as a property practitioner without one.
The PPA explicitly identifies the transformation of the property sector as a core objective – and B-BBEE compliance is viewed as critical to transformation. Pursuant to this objective, section 50(a)(x) of the PPA therefore functions as a ‘transformation-focused licensing mechanism’ for the property market. A valid B-BBEE certificate, which is effective for the financial year in which the entity is rated and must be generated by an accredited verification agency, operates as a statutory prerequisite for first-time applicants and those seeking to renew existing FFCs.
While the court held that there is nothing inherently irrational in Parliament using this certification regime to advance legitimate PPA objectives and that transformation may be pursued through legislation, the constitutional conundrum lies in the particular mechanism Parliament enacted to realise that aim.
What is a ‘valid BEE certificate’?
Under the PPA, a ‘valid BEE certificate’ is not defined. Further, the court found that the applicable B-BBEE framework does not provide a single uniform document called a ‘BEE certificate’ either. The Amended Property Sector Code recognises varying forms of proof for different categories of enterprise, including, in specified circumstances, sworn affidavits and CIPC certificates.
Critically, regular changes in the PPRA’s implementation of the requirement are telling. In February 2024, it reminded principal property practitioners of section 50(a)(x). At a March 2024 webinar, the PPRA stated that natural persons were exempt from the provision. Thereafter, applications were rejected where they were not accompanied by certificates from SANAS-accredited verification agencies, and certificates below Level Eight were treated as invalid. In August 2024, the PPRA advised industry bodies that it was reviewing its position again. This conduct, while not unlawful, clearly illustrates the uncertainty surrounding the statutory requirement.
Why was section 50(a)(x) declared unconstitutional?
Against this backdrop, the court in Sakeliga found that neither the PPA nor the applicable statutory framework identifies with reasonable certainty:
- What document is required;
- From whom it is required; or
- What substantive standard must be met for it to be ‘valid’, per the impugned provision.
Accordingly, section 50(a)(x) fails the requirement of legal certainty inherent in the rule of law.
Moreover, since an FFC is necessary for lawful practice, uncertainty over the document required to obtain one affects a person’s ability to enter or remain in the occupation. As a result, the court concluded that this constrains the occupational freedom protected by section 22 of the Constitution – a limitation not shown to be reasonable and justifiable.
How does this impact FFC applications?
In formulating an order, the court declined to ‘read in’ a replacement requirement under section 50(a)(x) because doing so would require it to decide what proof of B-BBEE status is acceptable, who must provide it, and what substantive standard applies, which are legislative choices and beyond the remit of the judiciary.
The declaration of invalidity has been referred to the ConCourt for confirmation. Until such time, the PPRA may not refuse to issue an FFC solely because an applicant does not satisfy section 50(a)(x) of the PPA. Notably, other requirements of the FFC regime are not displaced by the order.
If the ConCourt confirms the declaration, the invalidity of section 50(a)(x) will operate prospectively from the date of confirmation and will not affect any FFCs issued before such date.
Concluding remarks
For property practitioners, the Sakeliga judgment offers immediate relief: For now, section 50(a)(x) cannot be the sole basis on which the PPRA refuses to issue an FFC. However, the final position rests with the Constitutional Court – and possibly Parliament’s next move on legislating clear, transformation-linked FFC requirements.
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