We often hear and read about fraudulent property transactions in the media. The truth is that it happens more often than what is reported. The property sector generates a constant flow of individuals looking to either buy or sell properties which creates opportunities for fraudsters to deceive buyers and sellers alike.  The aim of this article is to explore ways in which buyers and sellers can guard against the misfortune of losing their investment and should worse come to worst, to look at the relief that may be available to the victims of property transactions that have gone wrong.

In the first instance, property buyers and sellers are advised to do their due diligence on the key role players in the transaction to verify and confirm that these individuals are properly and legally qualified to provide property related services to members of the public. This will include the property practitioner (more commonly referred to as the “estate agent”) as well as the conveyancing attorney who have been appointed to oversee registration of the transaction.  Dealing with legitimate professionals does not only afford peace of mind, but also provides security against the risk of suffering financial losses due to theft or misappropriation of funds.

By law, both estate agents and conveyancing attorneys are required to have a valid fidelity fund certificate before they are allowed to render their services to the public. A fidelity fund certificate for estate agents is issued by the Property Practitioner’s Regulatory Authority (PPRA), while a fidelity fund certificate for conveyancing attorneys is issued by the Legal Practitioner’s Fidelity Fund (LPFF).  Although the two funds are established, regulated, and managed separately by different legislation and bodies, their main purpose is to protect the public against losses suffered at the hands of either estate agents or attorneys.

The PPRA will only consider a claim against an estate agent if:

1. the claim relates to financial losses arising from theft of trust monies, failure of an estate agent to timeously deposit moneys received into a trust account, the failure to open a trust account or the failure to retain money in a trust account until lawfully entitled to it or instructed to pay such money to a third party;
2. the theft or failures were committed by a property practitioner;
3. the claimant has, within 3 months of becoming aware of the theft or failures, given written notice of the claim to the PPRA board;
4. the claimant has, within 6 months of being requested to do so, furnished the PPRA board with the necessary proof to substantiate the claim.

The LPFF has contracted with the Legal Practitioner Indemnity Insurance Fund (LPIIF) to provide a primary layer of professional indemnity insurance to all legal practitioners in South Africa. The LPFF protects the public against indemnifiable and provable losses arising out of legal services provided by attorneys. For more information on how to submit a claim against an attorney, visit the website of the LPFF at  https://www.fidfund.co.za/claims/

So, between the seller and the buyer, whose responsibility is it to perform the due diligence and how?

The estate agent is usually appointed – and commission paid for marketing the property, by the seller.  However, the buyer can also approach an agent with the request to find a suitable property. Estate agents often hold the buyer’s deposit or part of the purchase price in their trust account and therefore both buyers and sellers have a vested interest in the legitimacy of the agent and the agency concerned. Regardless of the estate agent’s appointment, the agent, by law, has a duty of care to both parties.

One can verify the name of an estate agent and confirm whether such agent is in possession of a valid fidelity fund certificate by calling the PPRA on 087 285 3222.

Similarly, the conveyancing attorney is also required, by law, to be registered and register the firm with the Legal Practice Council and to obtain a fidelity fund certificate for all partners or directors of the firm. It is important to note that not every attorney is permitted to attend to the transfer of a property or to registration of a bond.  Only attorneys who have passed the conveyancing exam and who have been admitted by the High Court of South Africa to practice as a conveyancing attorney are legally authorised to attend to property registrations at the Deeds Office.

Although the conveyancing attorney is usually appointed by the seller, it remains the duty of both the seller and the buyer to do due diligence on the conveyancing attorney especially since the attorney will oversee all financial aspects of the transaction until the proceeds of the sale of the property are paid over to the seller once registration has taken place. Where the purchaser borrows money from a bank to finance the purchase price, or part thereof, the bank will select a conveyancing attorney (usually referred to as a “bond attorney”) from their panel of attorneys.

One may verify the name of the conveyancing attorney, and confirm whether such attorney is in possession of a valid fidelity fund certificate on the following website https://lpc.org.za/members-of-the-public/list-of-legal-practitioners/ or by calling the Legal Practice Counsel on +27 (0) 10 001 8500.

Immovable property is considered an investment and since it usually involves large sums of money, it goes without saying that proper checks on the estate agent and the conveyancing attorney are crucial to ensure that work will be carried out with great accuracy, skill, and care.  Moreover, making thorough enquiries to ensure that the estate agent and conveyancing attorney have been thoroughly vetted by their respective bodies and that they have been issued with a valid fidelity fund certificate will ensure that one has some form of recourse in the event of a loss.

Matome Matsheta

Associate | Attorney and Conveyancer

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