HOA's May Exclusively Partner & Earn Money From Estate Agency Property Sales
The latest Supreme Court ruling makes allowance for community schemes to enter into partnership with estate agencies and earn money from property sales, but this will not last long.
Partnerships between community schemes and estate agencies received a legal nod of approval from the Supreme High Court in Bloemfontein this week when Judge Boissie Mbha ruled that the Atlantic Homeowners Association (HOA) and their CEO Harry White did not act as estate agents by concluding and abiding to the conditions of their property partner agreement with local estate agency, Emarie Campbell Real Estate t/a Pam Golding Properties.
The ruling was made with cost to the respondent, the Estate Agency Affairs Board (EAAB), with legal expenditure for both parties estimated to be close to R1 million.
This brought to a close three and a half years of contention over the legality of the aforementioned partner agreement which gave Campbell's agency sole marketing benefits in exchange for which the HOA received a percentage of the actual selling price on each property sold by the agency.
"This ruling is setting a president allowing all community schemes to enter into partnerships with estate agencies and earn commission from sales in the scheme and give the agency sole advertising rights with the exclusion of all the opposition agencies."
"This ruling is setting a president allowing all community schemes to enter into partnerships with estate agencies and earn commission from sales in the scheme and give the agency sole advertising rights with the exclusion of all the opposition agencies," commented property specialist Adv. Louis Taljaard, a lecturer at the College of People Management and Development.
Taljaard says he agrees fully with the Court in finding that the HOA is not an estate agent as defined in the '76 Estate Agency Affairs Act and that they therefore cannot be charged by the EAAB however he adds, this will all change next year when the new Property Practitioner's Bill is passed into law replacing the old Act and bringing HOA's into the definition of an estate agent.
Background
The EAAB originally charged the HOA and their CEO alleging that by accepting payment for each of the properties sold by their partnering agency, they were illegally acting as estate agents as they aren't registered as such. The charges followed after other agencies from this sought-after area near Cape Town complained to the EAAB about the exclusivity of the partner agreement. They brought to the attention of the Board that the agreement might be in breach of the EAAB's Code of Conduct and certain regulations.
Consequently, in 2016 the EAAB charged the HOA and their CEO as well as Campbell to appear before a disciplinary hearing which they refused to do. The argument of the charged parties were that the HOA and their CEO can't be defined as estate agents and as such the Board has no jurisdiction over them. Eventually the dispute ended up in the Cape High Court where in June 2018 the HOA and Campbell lost their application that the Court set aside the EAAB's decision to institute disciplinary proceedings. They then applied and obtained leave to appeal to the Supreme Court.
Commenting on their success in the Supreme Court this week Emarie Campbell says she believes the judgement demonstrates that their agreement with Atlantic Beach HOA was properly drafted.
"We choose the parties we align ourselves with carefully as our reputation is of the utmost importance to us. We must at all times ensure that we work within the legislative and fiduciary requirements of our industry, as well as in the interest of all our clients," says Campbell. She says their ordeal illustrates that agencies must have the financial backing to prove their innocence in a commercial litigation case. They estimate that the combined legal fees expended by both parties is close to R1 million.
Campbell continues that she's been in the industry for 32 years and has never been found guilty of breaching the EAAB Code of Conduct. Her estate agency signed a new agreement with the Atlantic Beach HOA after the contested first one expired at the end of June last year. Campbell says prior to signing this new agreement it was sent to the EAAB for their approval, but no response was received which they then viewed as tacid approval and they then concluded the new agreement.
"This will have far reaching effects on the market, but it will be short-lived."
Taljaard says the Supreme Court's ruling will have far reaching effects on the market, but it will be short-lived. "The new Property Practitioner's Bill will be promulgated next year replacing the old Estate Agency Affairs Act bringing HOA's into the definition of an estate agent and also limiting relationships with other property market service providers which could harm the interests of consumers (Sect 58)," he explains.
"The EAAB could have taken the HOA to the Consumer Tribunal and have charged them under section 8 of the Consumer Protection Act for discriminatory marketing by excluding other agencies from this partnership. This protection is repeated in Sect 58 of the new Act as stated above. It is my submission that they were barking up the wrong tree and now must face the liability of huge legal costs,' ends Taljaard.
In conclusion, the Supreme Court judgement makes allowance for community schemes to enter into partnerships with estate agencies and earn money on property sales and give the agencies sole marketing rights but these partnerships will have to be reviewed once the new Property Practioner's Bill is passed into law - which is expected to happen next year. These partnerships will then become illegal unless the HOA's apply to register as estate agents.