1. ESTATE AGENCY AFFAIRS BOARD Presentation to Arello 2014: Presented by Bryan Chaplog CEO of EAAB

2.  History of the EAAB  Functions of the EAAB  Challenges in the sector  Enforcement Activities and Penalties TABLE OF CONTENT

3.  The Estate Agency Affairs Act was promulgated in 1976 due to  - Large scale mismanagement of trust monies by estate agents  - Unethical behavior of Estate Agents  - Consumer complaints  - Self- regulation did not work  - Government needed to intervene and regulate HISTORY

4.  The EAAB Act provides for the establishment of a 15 member Board as follows:  5 Members from the real estate sector;  5 Members from consumer interest;  5 Members from professional fraternity;  The EAAB is operationally run by a CEO supported by an Executive Management team;  The staff compliment is 85 staff operating from a centralised office;  Opening regional offices in major provinces STRUCTURE AND RESPONSIBILITIES

5. Primary Mandate of EAAB  Regulate, maintain and promote the standard of conduct of estate agents having due regard to the public interest;  Issue fidelity fund certificates to qualifying applicants;  Prescribe the standard of training of estate agents;  Investigate complaints against estate agents and institute disciplinary proceedings against offending estate agents where required; and  Manage and control the Estate Agents Fidelity Fund. Secondary mandate  The EAAB is the Supervisory Body of the estate agency profession pursuant to the Financial Intelligence Centre Act and is obliged to take all steps required to prevent; alternatively, identify and report on, anti-money laundering and terrorist financing activities Expanded Mandate  Title deed restoration project;  Transformation of the Real Estate Sector; STRUCTURE AND RESPONSIBILITIES

6. The EAAB issues licenses to Estate Agents to legally operate in some sectors WE REGULATE Sectors Real Estate - residential Real Estate - commercial Real Estate - agricultural Business Brokers – selling of businessChallenges Time shareChallenges Property managementChallenges Shopping centers / Mall Management Residential rental / commercial leases Holiday LettingChallenges Sheriffs, Mortgage Originators, Bridge financingNew Act

7. The EAAB issues licenses to Estate Agents to legally operate in the sector FIDELITY FUND CERTIFICATES

8. The EAAB issues licenses to Estate Agents to legally operate in the sector FIDELITY FUND CERTIFICATES CONT/… Financial Year 13/14 Fidelity Fund Certificate Statistics StatusNumber Attorney89 CC4123 Partnership108 PTY2274 Sole Proprietor2203 Full Status14501 Intern Estate15671 Principal10757 Total49726

9. The EAAB has been appointed as the Professional Body for the real estate sector through the South African Qualifications Authority (SAQA). We issue professional designations - Professional Practitioner in Real Estate (PPRE) - Master Practitioner in Real Estate (MPRE) - Chartered Practitioner in Real Estate (CPRE) EAAB IS THE PROFESSIONAL BODY OF THE REAL ESTATE SECTOR

10. - We have an internal Inspectorate made up of lawyers and accountants -We have sign-up 13 external audit firms to perform compliance inspections nationally -We aim to inspect 6000 firms over a 5 year period -We include money laundering procedures in audit Challenges in the Sector EAAB DOES 100 COMPLIANCE INSPECTIONS PER MONTH IN REAL ESTATE SECTOR

11. INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013GAUTENG KWAZULU NATAL WESTERN CAPE Estate agencies operating illegally 97865 Principals with no valid Fidelity Fund Certificates 10313129 Non- principal & interns with no valid Fidelity Fund Certificates 10631037 Primary trust account operated in contravention to the EAA Act 25321050 Secondary and investment account operated in contravention to the EAA Act 868816 Interest earned on trust monies - not properly dealt with 67109 Retention of trust monies & payment from trust account in contravention to the EAA Act 58165 Insufficient accounting records of trust account 1586525 Improper admin of trust account 1896517 Accounting Records improperly maintained 47118851 Contracts completed by unqualified persons 522116

12. INSPECTION STATISTICS - NON-COMPLIANCE Inspection contraventions during 2012/ 2013GAUTENG KWA ZULU NATAL WESTERN CAPE Contravention in respect of contract generally 9010415 Contravention in respect of sole mandates 892015 Contraventions in respect of lease agreement 666822 Contraventions in respect of sale agreement 722221 Cessation of practice without notifying the EAAB 77217 Non-existent estate agencies 40160 Non-compliance with FIC act in respect of Duty to identify clients & keep records 1661932 Non-compliance with FIC Act i.r.o. Cash & Electronic Transaction exceeding R25 000 50187 Non-compliance with FIC Act i.r.o. internal rules 2415621 TOTAL CONTRAVENTIONS TO THE ESTATE AGENCY AFFAIRS ACT 25301534400

13.  We have Home Owners Associations and Gated Communities forcing estate agents to  - Pay “accreditation fees to start selling properties in gold estates, security estate e.g. “Oscar Pistorius estate”  Between $1500 - $20000 per year  HOA’s forcing sellers to pay % of selling price to the HOA as levy  Estate agent has to pay % of commission to HOA  Penalties for not using HOA “accredited agents”  Creating rules in the registration of title deeds and HOA rules Challenges in sector

14.  In Constitutional Court facing challenge on our search and seize rights vs right to privacy constitutional rights. Auction industry  Ghost Bidding in Auction Industry  Paying out claims for actions of unlicensed estate agents  Trust account mismanagement in the property management sector  Fight between liquidator and Curator over monies in the trust account Challenges in sector

15.  New Act being finalised  Partnership: external audit firm regulatory bodies  Online submission of audit report of the estate agents by their own Audit firms  Blocking of Firms if audit reports not received eg 4800 firms in 2013 i.e. 45% of firms  Immediate production of charge letters based on contraventions raised on online audit report  Auditors has to report on unlicensed trading and  Trust/ business account mismanagement  Illegal trading  Training of audit firms available  Working with HOA representative bodies to agree on better practices Solving Challenges in sector

16.  We have Disciplinary Committees chaired by an Advocate/Lawyer support by 2 Estate Agents  Summon the Complainant and Estate Agent  Make a ruling that is binding  New Act will make committee like a court  A Reprimand  Fine of up to $2500 per count  Withdrawal of license  Appointment of a Curator Bonis  Take over business and bank account  Process with further legal action Enforcement and Penalties

17. Overall Performance of Claims  The Board has received claims from consumers that has suffered pecuniary loss at the hands of unscrupulous estate agents;  The new bill will strengthen the recovery process of these amounts from the guilty estate agents as the current legislation is lacking in this process. STATISTICS OF NEW CLAIMS AGAINST THE FUND Claims Statistics ($)31 Mar- 14 31 Mar-1331 Mar-12 Value of claims lodged1 044 733 235 2201 050 233 Claims approved 486 652 28 860 380 366 Value of claims rejected407 782 38 900 258 822 Claims pending150 298 167 460411 043

18.  The real estate sector currently comprises approximately 10 000 estate agency enterprises.  It is encouraged that each enterprise look at taking on at least one formerly disadvantaged learner as an intern estate agent under their mentorship;  The ultimate success of the programme will, of course, necessarily depend on the collaboration of all stakeholders and role-players within the sector and their acceptance of the urgency of the transformation imperative.  In this regard and the EAAB encourages firms to participate in the programme. FOCUS ON TRANSFORMATION OF THE REAL ESTATE SECTOR ‘One Learner-One Estate Agency’ Programme

19. Legislation Review and the Proposed Property Practitioners Bill Cont/…  The Bill with create a legislative environment for the Authority to assist with title deed delivery nationally  The Bill seeks to promote transformation within the Real Estate Sector by requiring that all Practitioners comply with the Property Sector Charter;  It will promote operational effectiveness by ensuring that rulings of the Authority are equivalent to Magistrate court orders or rulings;  The new bill is aligned to all the recent court rulings affecting the real estate sector;  Only pay claims for lisenced estate agents

20. Thank you