Linda Ensor
10 September 2008
Cape Town — The Estate Agency Affairs Board (EAAB) had found that many estate agencies visited during inspections last year were not compliant with the law in significant respects, CEO Nomonde Mapetla said in the board's annual report.
She warned that the board would broaden the scope of future inspections to include the business accounts of agencies to ensure compliance. A review of applications for fidelity fund certificates would also be undertaken "to ensure that such certificates are issued in the public interest".
Mapetla said in the board's annual report tabled in Parliament yesterday that last year many estate agencies were disqualified from getting their fidelity fund certificates -- a precondition for conducting business - because of their non-compliance with the Estate Agency Affairs Act. A frequent contravention was the failure to submit auditors' reports.
Among the derelictions identified during inspections were the fact that trust accounts were not designated correctly. Mapetla said this could potentially have far-reaching consequences as it would be difficult for the board to prove that the money was trust money in the event of the death, sequestration or insolvency of an agent. Also, it was found that the statutory auditors' reports submitted to the board sometimes failed to reflect accurately the nature of the business and in some cases bordered on being "fraudulent".
Some estate agencies or their branches were found to be operating illegally as they did not have valid fidelity fund certificates issued by the board.
Bank costs and other charges were sometimes debited from the trust account instead of being treated as the cost of doing business.
Trust accounts, which should be regarded as sacrosanct, had been allowed to go into overdraft, which should never be allowed to happen as then the trust would not be able to pay the claims of trust creditors.
"Trust accounts were also found to have been illegally used for the payment of non-trust expenditure including rentals, telephone costs, stationery and so forth. Since these illegal practices inevitably lead to a situation of trust shortages they cannot be condoned by the board," Mapetla said.
Another contravention that was unearthed during inspections was the printing of names of conveyancing attorneys or bond originators on standard sales contracts used by estate agencies. This contravened the industry code of conduct as it deprived consumers "of the right to make their own appointments".
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