Court case launched on state overreach and BEE in the property sector

Sakeliga has launched a court case to reverse harmful state overreach and BEE in the property sector.

If successful, our case will remove the unjustified application of the Property Practitioners Act of 2022 from thousands of businesses and their clients, as well as restore their freedom to do business without BEE certification.

The case seeks to extend the gains made in 2024, when our threat of litigation forced the Property Practitioners Regulatory Authority (PPRA) to resume issuing Fidelity Fund certificates to businesses regardless of whether or not they participate in BEE. Earlier in 2024, the PPRA had started refusing to issue Fidelity Fund certificates – and thereby outlawing property businesses – based on BEE. However, as important as reversing the PPRA’s harmful actions was, it does not provide a long-term solution because it does not reform the underlying legislation.

We therefore now intend to have certain sections in the Property Practitioners Act (2022) and its regulations declared unconstitutional and invalid. This will provide a better economic environment affecting billions of rand per year, in the interest of a flourishing society.

First, we seek to roll back the overly broad definition of “property practitioner” in section 1 of the Act to a much more circumscribed one. We aim thereby to free the majority of property-related businesses and transactions from unjustified inclusion in the scope of the legislation.

When the new Act replaced the old Estate Agencies Affairs Act in 2022, it lumped the well-defined concept of an ‘estate agent’ together with eleven other business categories under the new term of “property practitioner.” This novel terminology implicates entities as diverse as direct sellers and lessors of property, property developers, estate agents, management agents, homeowners associations, bond originators, attorney firm employees, auctioneers, and more from a total of 12 different categories. State regulators are currently progressively implementing this expanded definition to entangle thousands of businesses and clients into an unjustified web of costly compliance, undermining their ability to create value for themselves and their communities.

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Second, our case seeks to relieve thousands of businesses from unjustified pressure to procure and provide BEE certificates. We do this by pointing out that it is improper for the Act to state that all “property practitioners” should have a Fidelity Fund certificate, yet make the issuance of that certificate subject to the unrelated requirement that they must have B-BBEE certificates. However, the conceivably legitimate purpose of a Fidelity Fund certificate is merely to ensure that property professionals like estate agents handle their clients’funds diligently and ethically. We therefore argue that section 50(a)(x), which establishes a link between B-BBEE certificates and Fidelity Fund certificates, serves no legitimate government purpose and is unconstitutional and invalid. Participation in BEE is not a requirement for handling client funds diligently and ethically.

Businesses are not obligated to participate in BEE and those who decline to participate should not be forced to waste resources on irrelevant compliance certificates. Ultimately, a B-BBEE certificate is a political instrument of the state, not a business requirement – it is not a valid precondition to economic participation and serving customers, clients, and communities.

Sakeliga’s purpose with this court case is to restore a better business environment relating to property matters. While many businesses and clients continue to find ways of doing business despite harmful state interference, all affected communities pay the price through lower standards of living.

Click here for court papers.