Property Practitioners Need to Have a Valid Fidelity Fund Certificate


Administrative problems at the Estate Agency Affairs Board (“EAAB”) have made life difficult for some estate agents, particularly with regard to the claiming of commission on sales of immovable property. The Estate Agency Affairs Act (recently repealed) prohibited an estate agent from claiming commission on a sale unless the estate agent had a valid fidelity fund certificate (“FFC”) at the time of the sale.

FFC’s are necessary to protect sellers and purchasers (and their money) from rogue estate agents. The need for an FFC, however, caused problems in the industry where an estate agency or estate agent had complied with the requirements for obtaining a valid FFC but the EAAB hadn’t issued the relevant FFC timeously.

The courts tried to come to the assistance of estate agents finding themselves in this situation.

On 10 June 2020 in Signature Real Estate (Pty) Ltd v Charles Edwards Properties and Others (415/2019) [2020] ZASCA 63 the Supreme Court of Appeal allowed a claim for commission where an estate agent had complied with the requirements for a valid FFC to be issued, but the EAAB had failed to issue an FFC timeously. The Court also stated that a claim would exist where the EAAB had made an error on the FFC.

It is difficult for estate agents to prove to a seller or conveyancer that they have complied with the requirements for an FFC, so this case will have little practical value.

The new Property Practitioners Act (“PPA”) has tried to rectify this problem by requiring the EAAB to issue the FFC within 30 working days (or provide reasons for an extension which does not exceed 20 working days), which will hopefully help. However, the PPA goes further than the Estate Agency Affairs Act by prohibiting conveyancers from paying a claim for a commission without first receiving a valid FFC. This means that estate agents will have to work together to resolve the administrative issues in the EAAB so that FFC’s are issued timeously.

Should you have any conveyancing queries, please do not hesitate to mail our conveyancer, Marchelle Botha or contact her at 031 266 2530.