Under the Property Practitioners Act, the scope of ‘property practitioner’ determines who is subject to the regulatory framework of South Africa’s property sector. Since its inception, the Act has, for example, classified an apartment owner as a property practitioner solely because the property is situated in a sectional title scheme. In Sakeliga NPC v Property Practitioners Regulatory Authority, this anomaly was challenged – resulting in the High Court declaring part of the statutory definition of ‘property practitioner’ overly broad and unconstitutional.
The challenge: Who qualifies as a ‘property practitioner’?
The Property Practitioners Act (‘the PPA’), which came into operation on 1st February 2022, replaced the Estate Agency Affairs Act and introduced a broader regulatory regime for the property industry. In the years following its commencement, only a handful of cases have interpreted the provisions of the PPA.
In this case, Sakeliga – a business advocacy organisation – challenged the constitutionality of paragraphs (a)(iv) to (e) of the definition of ‘property practitioner’ under section 1 of the PPA. As we previously explored, Sakeliga separately challenged section 50(a)(x) of the PPA, which required the possession of a ‘valid BEE certificate’ for the issuing of a Fidelity Fund certificate.
Central to the challenge concerning the Act’s definition is the distinction between paragraphs (a) and (b) of section 1. The principal definition is contained under section 1(a), which includes natural and juristic persons who, for gain, hold themselves out as performing specified property-related activities on the instructions, or on behalf of, another person.
By contrast, section 1(b) of the PPA includes ‘any person’ who sells, markets, promotes, or advertises a part, unit or section of, or rights or shares in, a property or property development, including time-share and fractional ownership interests.
Unlike section 1(a), section 1(b) contains no requirement that the activity be undertaken for gain, in the ordinary course of business, or on behalf of another person. Its wide formulation could therefore encompass private owners, persons undertaking isolated transactions, and platforms merely publishing property advertisements.
For STBB’s Managing Director and skilled real estate attorney, Darren Brander, this anomaly is clear:
‘The difficulty with section 1(b) is that it doesn’t distinguish between commercial property activities and certain isolated, once-off transactions. In fact, its wording is broad enough to bring people within the framework of the Property Practitioners Act even when property transactions are not part of their business.’
Why does the scope of the definition matter?
Under the PPA, classification as a property practitioner carries significant legal and regulatory consequences. For instance, sections 2 and 3 of the PPA establish the scope and objectives of the legislation, which includes professional regulation, consumer protection, licensing, market participation, and transformation of the property sector.
The Act gives effect to these objectives through various mechanisms, namely compliance requirements and professional conduct obligations.
Notably, section 48(1) of the PPA prohibits persons from acting as property practitioners without the required Fidelity Fund certificate, while section 48(3) makes contravention of that prohibition a criminal offence.
‘The definition is not merely a technical label. It expressly determines who is subject to these regulatory obligations and potential sanctions for non-compliance,’ adds Brander.
In the present case, the constitutional question was accordingly whether the categories of persons included in the definition of a ‘property practitioner’ bear a rational connection to the purposes of the PPA.
Why the High Court found section 1(b) of the PPA unconstitutional
The court accepted that the PPA legitimately regulates activities beyond traditional estate agency. For example, developers and commercial property marketers participate directly in the property market, and bringing them within the scope of the Act is rationally connected to consumer protection, market regulation, and sectoral transformation.
However, the constitutional defect lies not in the expanse of the definition itself, but rather its failure to expressly distinguish between commercial property activity and certain activities that do not rationally justify inclusion under the Act.
Specifically, the court identified three instances in which section 1(b) of the PPA amounts to irrational over-inclusion.
First, the definition promotes the unequal treatment of private property owners. A natural person privately selling a free-standing property does not become a property practitioner under section 1(a) of the Act. However, section 1(b) effectively classifies a natural person selling their own sectional title unit as a property practitioner solely because of the nature of the property.
For Brander, the legal consequences of this incongruity are stark:
‘From the perspective of a private homeowner, the inconsistency in section 1(b) is striking. Two people could be undertaking essentially the same transaction, yet one could be classified as a property practitioner simply because the property being sold is a sectional title unit.’
The court accordingly found no rational justification for treating these owners differently by imposing regulatory status on one and not the other.
Second, the definition encompasses isolated transactions outside the ordinary course of business. Section 1(b) of the PPA includes persons who sell or market the specified property interests without conducting a property-related business.
According to Brander, a company disposing of the sectional title unit from which it operated could fall within the definition of ‘property practitioner’ despite not being engaged in property development or commercial property marketing.
‘A business selling premises it no longer needs is not necessarily participating in the property market in the same way as a property developer. The judgment recognises the importance of distinguishing an isolated disposal of an asset from commercial property activity,’ says the Cape Town-based real estate lawyer.
Resultantly, the court held that the considerations justifying the regulation of developers and commercial marketers don’t extend to persons merely disposing of assets outside their ordinary business activities.
Third, the definition extends the Act’s reach to advertising platforms. Section 1(b) of the PPA fails to draw a distinction between persons substantively involved in marketing property and publishers or online platforms providing a medium through which the advertisement is published.
Although the Regulations contemplate an exemption for parties acting solely as conduits for advertisements placed by property practitioners, the court held that the exemption mechanism cannot cure the constitutional defect. Specifically, an exemption under section 4 of the PPA presupposes that the person falls within the Act and is neither permanent nor retrospective.
Brander emphasises the practical dimension of this finding:
‘There is a fundamental difference between actively marketing property and providing the platform on which someone else advertises it. The court recognised that publishing an advertisement does not, without more, justify treating the publisher as a property practitioner.’
The court’s order
In light of the above, the court declared section 1(b) unconstitutional to the extent that it irrationally extends ‘property practitioner’ status to certain private owners disposing of their own property interests, persons undertaking transactions outside the ordinary course of business, and those providing a platform for property advertisements.
Ultimately, it found no rational connection between subjecting these three categories of persons to the regulatory consequences of being a property practitioner and the purposes of the PPA.
As the declaration of invalidity is subject to confirmation by the Constitutional Court, the court ordered that section 1(b) be read as excluding the three identified categories, with Parliament granted a 24-month suspension thereafter to remedy the defect. If Parliament fails to act within the stipulated period, the reading-in remains operative until corrective legislation is in force.
What does the ruling mean for property owners?
Although delivered by the Pretoria High Court, the judgment has implications for the property sector nationally. While its reasoning does not automatically bind other High Court divisions, the court’s granting of interim relief pending ConCourt confirmation is binding on the PPRA, which administers the Act. Indeed, the PPRA has publicly acknowledged the interim measures in its recent communication to the property sector.
In essence, the judgment confirms that selling property does not, in itself, necessarily make someone a property practitioner. Whether a person falls within the PPA’s scope depends on the nature and circumstances of their activities and the applicable statutory provisions. Crucially, the court’s order does not exclude persons who otherwise qualify as property practitioners under the Act’s definition.
Emphasising the significance of the ruling, Brander highlights the practical import for property owners:
‘The judgment does not create a blanket exemption for anyone, including developers, selling their own property. A person may still qualify as a property practitioner under another part of the Act. The type of activity and the specific circumstances in which it is undertaken remain critical.’
Ultimately, the ruling preserves Parliament’s power to regulate commercial property activities while establishing an important constitutional boundary: Regulatory status must bear a rational connection to the purposes legislation seeks to achieve.
Before proceeding with a property transaction, seek advice from an experienced real estate attorney to clarify your legal obligations and ensure compliance with the PPA.
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