Estate Agency Affairs Board bans a 'dubious' home owners association practice

The Estate Agency Affairs Board, the statutory consumer protection body of the property industry, has outlawed the practice by many homeowners associations (HOA) in residential security estates of requiring estate agents to pay accreditation fees in return for exclusive rights to market properties in the estate.

The prohibition ends a dispute between estate agents and the Institute of Estate Agents of SA and HOAs dating back to 2009.

In terms of a recent practice note it published, the board also outlawed the HOAs' practice of restricting homeowners to the use of accredited estate agents and imposing penalty levies on those who did not use accredited agents.

The HOA practice of claiming a percentage of the commission earned by the estate agent was also prohibited.

Bryan Chaplog, the chief executive of the Estate Agency Affairs Board, said in the practice note these actions by HOAs contravened the Estate Agency Affairs Act and the regulations and code of conduct to the act.

'Estate agents involved in practices of payment of accreditation fees to HOAs or performing any action impairing the integrity of such estate agents may be subjected to a disciplinary process which may result in him/her being liable for a fine of up to R25 000 or an appropriate sanction prescribed by the Estate Agency Affairs Act,' he said.

HOAs that were involved in the determination of accreditation fees, restrictive marketing and sale of properties which were contrary to the consumer protection legislation, or claiming of a percentage of commission earned by an estate agent, may be subjected to disciplinary processes of the board. They might also be held liable in terms of the Estate Agency Affairs Act, he said.

Ronald Ennik, the founder and chief executive of Ennik Estates, which is affiliated to Christie's International, welcomed the prohibition. He stressed it was great news for sellers in gated estates because at last they now had access to achieving the best possible sales prices for their homes in a free and open market.

'Agent accreditation has been a dubious practice ever since it was first applied in the 1990s and I have been calling for it to be scrapped. Accreditation obstructs the free flow of market forces and could thus impact negatively on homeowners' return on the capital investment in their most precious asset - their homes.'

Jeanne van Jaarsveldt, the president of the Institute of Estate Agents of SA, said that the publication of the practice note followed a legal initiative started by the institute about five years ago against the Association of Residential Communities that resulted in a judgment in favour of the institute in the Pretoria High Court.

He added that estate agents were asked to pay exorbitant fees, in some instances up to R50 000 a year, to be accredited to sell properties in gated estates.

Any party that received commission from a property transaction was required to have a valid fidelity fund certificate, he said, adding that the HOAs were playing an intermediary role between the agent and the seller.

Creating an 'elite club' of estate agents was also anticompetitive and a transgression on this basis, he said.