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  0. Claims Process and Litegation Against an Estate Agent
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0. Claims Process and Litegation Against an Estate Agent
Author : Estate Agency Affairs Board [EAAB] 

CLAIMS PROCESS & LITIGATION:

Estate Agency Affairs Board - EAAB
Claims Process and Litigations

Estate Agency Affairs Board was established in terms of Estate Agents Affairs Act 112 of 1976. The Board is a legal person and can therefore sue or be sued on its own name. It has perpetual succession and any change in the composition of member of the Board does not affect its legal personality. The Act also imposes a duty to the Board in terms of Section 7, to promote and maintain the standard of conduct of estate agents and to regulate the activities of estate agents, having due regard to public interest

Payments from the Fund in respect to a claim

June 20, 2011

Payments from the Fund in respect to a claim

The only loss that may be recovered from the fund is actual pecuniary loss and not, for example, compensation for inconvenience. While the Act places no ceiling on the amount of the loss that may be recovered from the fund the following points must be noted:

In terms of section 13(b) of the Act the Board is under no obligation to compensate a claimant for any legal expenses incurred in establishing the claim, the Board does however, have discretion to make a contribution towards these expenses

Pursuant to section 19(2) a person may not recover a sum larger than the difference between the amount of the loss suffered and the amount or value of all moneys or other benefits which that person has received or is entitled to receive from any other source for the loss

Section 19(3) grants the Board discretion to pay interest on the amount of any claim admitted against the fund with the interest rate paid not to exceed the limit set from time to time by the Prescribed Rate of Interest Act of 1975

Liability

June 20, 2011

The Act provides for certain instances where the liability of the fund to compensate is excluded. These instances follow

Section 18(3): No person shall have a claim against the board for compensation from the fund unless:

The claimant has, within three months after having become aware of the theft of the trust money by an estate agent or the failure of the estate agent to pay the money into a trust account or should, by the exercise of reasonable care, have become aware of the theft or failure, given written notice of the claim to the Board; and

The claimant has, within six months after a written demand was sent to him/her by the Board, furnished to the Board whatever proof the Board may reasonably require to substantiate the claim.

The Board may, in its discretion, having regard to all relevant circumstances, condone non-compliance or extend the periods concerned.

Section 19(1): No person may, without the permission of the Board, commence any legal action against the Board for compensation from the fund unless and until the claimant has all relevant rights of action or other legal remedies available against the estate agent in respect of whom the claim arose and all other persons liable for the loss suffered by the claimant

Including, for example, an estate agent‘s employee as well as other persons not connected with the estate agent, such as an outsider who stole the claimant’s money before it was paid into the estate agent’s trust account.

Where a claimant has received full compensation for the loss from the estate agent or from other persons liable for the loss no further claim will lie against the fund.

The Board, in practice, requires the claimant to lay a criminal charge of theft against the offending estate agent but does not insist that the estate agent should be convicted before accepting liability of the fund to pay compensation. If the estate agent has been found guilty of the theft by a court this will constitute conclusive proof of the theft of the trust money. The circumstances of each individual case will, determine how far the criminal proceeding against an estate agent must proceed before the Board will accept liability for the payment of the claim.

Section 19(4): The following persons have no rights of action against the Board for compensation by the fund

The spouse of an estate agent by reason of any theft committed by such estate agent;

Any estate agent by reason of any theft committed by his/her partner or, if the estate agent is a company, by any director of the company or, if he/ she is a director of the company, by any co-director of the company or if the estate agent is a close corporation by any member of the close corporation, or, if he/she is a member of a close corporation, by any co-member of the close corporation or by any person employed by him/her as estate agent.

Persons who suffer a loss as a result of acts by employees of an attorney who renders estate agency services since any claim in this respect will lie against the Attorney’s fidelity fund.

An estate agency business is not entitled to recover any loss from the fund if the business has been held liable to pay compensation to a member of the public because of the theft committed by an employee agent. Firms should, again, asses the risk and take out the necessary fidelity insurance policies to cover any such loss.

Section 20:  The Board may, in any action against it in respect of the Fund, raise any defence which could have been raised by the person against whom the claim arose.If for example a claim against an estate agent has prescribed the Board, upon being sued, could raised the defence of prescription. Other defences that could be raised would include set- off and the right to deduct commission due to an agent.

How to lodge a claim:

The Estate Agency Affairs Act, Section 12(1) provides for the establishment and control of the Estate Agents Fidelity Fund. The fund is intended to reimburse persons who in certain circumstances have suffered pecuniary (actual) loss due to theft of trust monies by estate agents.

Claims must be lodged by way of an affidavit from the claimant setting out the circumstances giving rise to the claim. Necessary supporting documents will be required, such as:

  • Proof of payment include receipts, paid out cheque,bank statements
  • Relevant contracts concluded, Lease or Sale Agreement
  • Police case number and full details of the investigating officer, and
  • Proof of the pecuniary loss suffered.June 9, 2011

Disciplinary Process:

Lodging of a Complaint against an Estate Agent
Lodging of a Complaint against an Estate Agent must be by way of completion and submission of the Complaint Initiation Form which, can be downloaded from the EAAB website

Consideration of Complaint and Investigation, the EAAB will:

  • Acknowledge receipt of complaint;
  • Respondent will be notified of the complaint and provided with a written response
    within 30 days;
  • After investigation, the matter shall be considered by the EAAB;
  • The EAAB may decide to investigate further/ withdraw/ immediate/ charge.

Charge against an Estate Agent

  • It must be in writing;
  • Must contain an exposition of the conduct;
  • Must be delivered by hand/by registered post.

Disciplinary Committee of Inquiry

  • Summonses and subpoenas sent to relevant parties to appear;
  • Chairperson and two committee members conduct the proceedings;
  • Case presenter/prosecutor present the cases;
  • Proceedings are mainly inquisitorial;
  • Legal representation is permitted.
  • Decisions of the Disciplinary Committee
  • Respondent found guilty or not guilty;
  • If guilty – reprimand/fine to a maximum of R25 000 per contravention;
  • A compensatory award of up to 80% of the fine imposed may be awarded to a claimant who suffered pecuniary loss;
  • Withdraw a Fidelity Fund Certificate.
  • Appeals Procedure
  • Must be in writing and submitted within 30 days;
  • Deposit of R1 000 for the transcript;
  • Disciplinary committee provide written reasons for judgment.

The Board may:

  • Confirm, amend or reverse the decision;
  • Remit the matter for further hearing;
  • Confirm or suspend penalty imposed;
  • Set aside penalty and impose new penalty;
  • If successful, the deposit paid shall be refunded in full.

Requirements for lodging a claim

The following requirements are set out in section 18(3) of the Estate Agency Affairs Act No 112 of 1976 for lodging a claim against the fidelity fund:

The claimant must within 6 months after written demand was sent to him by the EAAB, furnish the EAAB with whatever proof the EAAB may require;

The claim must be submitted within 3 months from the date the claimant become aware of the theft of his money by the estate agent, or failure by the estate agent to pay money into his trust account;

The claimant must have dealt with an Estate Agent/ Estate Agency Firm,. Section 1 of the Estate Agency Affairs Act defines an estate agent as any person who for the acquisition of gain, on his own account or in partnership, in any manner holds himself out as a person who, directly or indirectly advertises that he, on instruction of or on behalf of any other person, sells or purchases or publicly exhibits for sale of immovable property, or any business undertaking; or if a company is selling or leasing its own properties cannot in terms of the Estate Agency Affairs Act be classified as an estate agent, or to be acting in the capacity as an estate agency;

The claimant must prove his claim against the Fidelity Fund to the reasonable satisfaction of the EAAB by submitting the under-mentioned documents:

  • Affidavit (complaint initiation form) detailing particulars of the claim;
  • Copies of proof of payment for example receipts, paidout cheques, bank statements, Audited statements;
  • Copy of contract (sale/ lease agreement);
  • Details of criminal case opened at the South African Police Service of the Commercial Branch Unit.

The claimant must have exhausted all available legal remedies against the Estate Agent involved, and against other persons responsible for the loss by attaching proof of such, as copy of the summons, judgement obtained, writ of execution etc.

FORMS:
1. Lodging a claim against an estate agent

2. Complaint Initiation Form

This form initiates an investigation by the Estate Agency Affairs Board into the alleged improper conduct of an estate agent acting in their capacity as such.

Transfer of rights and remedies to the board

June 13, 2011

If the Board settles a claim against the fund in full or in part all rights and remedies of the claimant against the parties responsible for the loss pass to the Board to the extent of the settlement in terms of section 21 of the Act. The claimant, thus, loses all further rights of action against the estate agent or person responsible for the loss...  which then vest in the Board

When does a claim lie against the fund?

June 13, 2011

Pursuant to section 18 (1) of the Estate Agency Affairs Board Act the purpose of the Fund is to reimburse persons who have suffered pecuniary loss under certain defined circumstances. These circumstances are listed as follows...

When does a claim lie against the fund?

Pursuant to section 18 (1) of the Estate Agency Affairs Board Act the purpose of the Fund is to reimburse persons who have suffered pecuniary loss under certain defined circumstances. These circumstances are listed as follows:

The theft of trust money by an estate agent (Section18)

The theft must have been committed by an estate agent as defined in section 1(vi) of the Act. It is not, however, required of the claimant to prove that the estate agent in question had been issued with a valid fidelity fund certificate by the Board. There is, thus, no onus on the claimant to determine whether or not the person with whom he is dealing is a registered estate agent.

The theft must relate to trust money, which is defined in section 34 of the Act as follows:

Money or other property entrusted to an estate agent in his /her capacity as an estate agent. If money is, for example, entrusted to an attorney, not in his capacity as an estate agent but in his capacity as an attorney, no claim will lie against the fund should the attorney steal those moneys. Similarly, moneys paid to an estate agent for investment purpose, such as in the financial market, cannot be regarded as money paid to that person in his capacity as an estate agent since the investment of the moneys in the financial market is not a defined activity of the estate agents.

Money collected or received by an estate agent and payable in respect of, or on account of, any estate agency service and moneys, including insurance premiums, collected or received by an estate agent and payable in respect of any immovable property, business undertaking or contract for the building or erection of any improvements on immovable property. (Section 32(2) (a))

These monies will not always necessarily be entrusted to an estate agent in his/her capacity as an estate agent. For example, if a buyer and a seller who have privately concluded the sale of the seller’s property without the intervention of an estate agent, agree between themselves, that the deposit payable in respect of the purchase should be held in trust by an estate agent forthe benefit of the seller the estate agent will not receive the deposit in his/her capacity as an estate agent since estate agent was not involved inthe main transaction.

Where an estate agent’s employee steals money paid to an estate agent a claim will not lie against the fund unless the employee concerned is also an estate agent. If the theft is committed by, say, a cashier who is not an estate agent there is no claim against the fund. The firm would be held vicariously responsible to reimburse the stolen moneys.

The failure of a principal estate agent to open and keep a separate trust account with a bank and /or the failure of a principal estate agent and /or persons in the service of that principal estate agent forthwith to deposit into the principal‘s trust account all monies held or received by the principal or persons in the (section 32(1)

Section 32(1) of the Act requires an estate agent to keep one or more trust account and forthwith to deposit therein all moneys held or received by that person, in the capacity of an estate agent, on behalf of any person. Moneys held or received by an estate agent‘s employee on behalf of anyother person must also forthwith be deposited into the trust account.

No claim against the fund would lie if, for instance, a non estate agent cashier steals money which has already been paid by the estate agent into trust account. In such case the claimant has a claim against the firm itself or the cashier personally. It is for this reason that the Board recommends that all estate agents firms should duly assess risk and take out insurance cover to provide for these eventualities

The failure of the principal estate agent to retain trust moneys in the firm’s trust account until lawfully entitled, or lawfully instructed, to make payment therefrom (section32(2)(e))

In terms of section 32(2)(e) of the Act an estate agent must retain all moneys in his/her trust account until lawfully entitled or entrusted to make payment from the trust account to any person. A claim would, for example lie against the fund where the purchaser of a proposed sectional title unit suffered a loss because the developer of the scheme was liquidated before the completion of the development and the estate agent to whom a buyer had entrusted a deposit had paid the deposit from his/her trust account to the developer prior to the opening of the sectional register. Under such circumstances the estate agent will have prematurely released moneys from the trust account resulting in pecuniary loss.

Trust Monies

June 13, 2011

What are trust monies?

Monies entrusted to an estate agent in her/his capacity as an estate agent.

The money collected/ received by an estate agent in respect of estate agency services e.g. deposits/rentals.

The money collected or received by an estate agent and payable in respect of: Immovable property; Business undertaking; Building contract for the building or erection of any improvements on immovable property.

The circumstances under which a claim can be lodged

June 13, 2011

The Fund is applied to reimburse persons who have suffered pecuniary loss by reason of theft of trust money by an estate agent (Section 18).

Failure of estate agent forthwith to deposit all monies held or received on behalf of any other person into the trust account (Section 32(1), 32(2)(a) and 32(2)(e) of the Act).

Failure of a principal estate agent to open and keep a separate trust account with a bank [Section 32(1)].

Failure on the part of principal estate agent to retain trust money in his/her trust account until he/she is lawfully entitled or lawfully instructed to make payments there from [Section 32(2)(e)]

Fund Purpose

June 13, 2011

Fund Purpose

The Fund is established for the following:

  • To reimburse person who have suffered financial loss as a result of dealing with an estate agent e.g. theft of trust monies;
  • Payment of insurance premium;
  • Payment of expenses involved in the control and management of the Fund;
  • Public awareness Programme.

Establishment of the Fund (Section 12)

June 13, 2011

Establishment of the Fund (Section 12)

The Estate Agency Affairs Act provides for the establishment and control of the Estate Agents Fidelity Fund which fund is controlled and managed by the Board.

The Fund derives its income from the following sources:

  • Estate Agents annual contribution
  • Investments
  • Interest paid to the Fund
  • Monies accruing to the Fund from any other sources e.g. donations

              For any further assistance:
              The EAAB can be contacted on:  Tel no:  087 285 3222

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