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Wednesday Sep 10, 2014

EAAB revises ban on HOA accreditation fees

The Estate Agency Affairs Board (EAAB) has revised the directive it issued earlier this year that outlawed the practice by many homeowners' associations (HOA) in residential estates of requiring estate agents to pay accreditation fees in return for exclusive rights to market properties in the estate.

The EAAB, the statutory consumer protection body of the property industry, said in a practice note on Friday that it was now permissible for HOAs to enter marketing arrangements with estate agents who chose to do so 'on condition that any fees payable constitute a reasonable cost of recovery for services rendered by the HOA'.

This included but was not limited to the supply of security access cards, the supply or erection of advertising boards, supply of maps or directions to properties or branding opportunities, it said.

The Institute of Estate Agents of SA ( IEASA) previously claimed estate agents were being asked by HOAs to pay exorbitant fees, in some instances up to R50 000 a year, to be accredited to sell properties in gated estates.

The dispute pitting estate agents and the IEASA against HOAs about registration fees and exclusive marketing deals dates back to 2009.

Every homeowner had the freedom to appoint their agent of choice to market, sell or let a property.

The EAAB stressed in the note that every homeowner still had the freedom to appoint their agent of choice for the marketing, selling or letting of their property.

Bryan Chaplog, the chief executive of the EAAB, said the practice of agents paying HOA registration fees for exclusive property market arrangements was continuing despite the note issued by the EAAB in February declaring it unlawful.

The consequence of this practice was the unfair exclusion of a vast number of estate agents, particularly new entrants to the sector, while it also infringed on the freedom of choice of homeowners in the appointment of estate agents.

Chaplog stressed the payment of any fees, including the sharing of any commission or payment of any penalties by the seller to the estate agent, contravened the ethical provisions of the code of conduct of the EAAB as issued in terms of the Estate Agency Affairs Act of 1976 and competition laws because it had the effect of limiting competition.

Chaplog said the EAAB had met representative bodies of estate agents, estate agencies and HOAs to provide guidance on practices related to the payment of fees or sharing of commission to procure any degree of exclusivity in the marketing of properties for sale or for letting.

'The EAAB is working together with stakeholder bodies to reach proper enforcement of common and acceptable business practices relating to this matter,' he said.

But Chaplog warned that an agent in any way contravening the ethics of the code of conduct might be subject to a disciplinary process which, upon a guilty finding, might result in sanctions by a committee of inquiry established by the EAAB.

Jan le Roux, the chief executive of Real Estate Business Owners of SA, said the industry body welcomed the revised notice, which made marketing agreements between estate agencies and HOAs lawful under certain conditions.

'Although not perfect, the latest notice brings more clarity,' he said. He added that the practice of paying fees to HOAs could be justified if fair and equitable in relation to the services being rendered, as now stipulated by the EAAB.

Le Roux said Rebosa did not support the exclusion of all other estate agencies to carry out business within an area.

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