Commercial & Industrial property brokers or agents are required to be registered with the Estate Agents Affairs Board (EAAB) and hold a valid Fidelity Fund Certificate. An agent or broker is not entitled to any commission if he is acting illegally, i.e. without a Fidelity Fund certificate (FFC). Section 34A of the Act precludes an agent from instituting actions to claim commission in the absence of a Fidelity Fund certificate.
It is important that landlords and sellers of commercial and industrial properties ask for proof of the broker’s fidelity fund certificate before issuing them with a mandate or any information on a property which could imply a mandate. Already, most attorneys, major landlords and property funds insist on a valid FFC before paying out any commission.
No person is entitled to a finder’s fee or referral fee or commission unless they hold a valid FFC. If brokers or agents, think they can pay referral fees as consultants fees; or otherwise, they need to be aware that now, not only the brokers trust account needs to be audited but also their business accounts. If they are a sole proprietor and do not have a dedicated business bank account, their personal account will need to be audited. They will have to properly account for any fees; and give the auditor proof , that the person they paid the fee to, had a valid FFC. If an agent or broker does not provide an audit certificate to the EAAB, they will not note be issued with a FFC and will therefore, not be entitled to earn commission from any broker or estate agents activities.
Commercial, Industrial and Residential agents or brokers will need to get the necessary NQF Qualification by the end of 2013 and will need to achieve or be eligible to obtain an exemption for the Estate Agency Affairs Board Professional Designation Examination (PDE) and undergo Continuous Professional Development(CPD), over a rolling three year cycle. Many Industrial and commercial property brokers act as sole proprietors and do not employ anyone. In order to do this, they now need to hold a NQF 5 level qualification as they are acting as a principal.
So, what is the likely effect of all of this? Firstly, the days of “fly by night” operators acting with a cell phone, no FFC and little else, are numbered. They will find that they need to comply with all aspect of the Estate Agents Legislation and this can be time consuming and expensive. If they don’t t have a valid FFC, they will find Landlord’s and Sellers, will not pay them any commission. This will take many of these operators out of the market, which will benefit the serious operators who operate proper businesses. It will benefit the industry as a whole. I also believe that this will result in brokers becoming more professional and tougher on commission negotiations in future.
Broker’s often collaborate and share commission in commercial and industrial property sales and leases. My advice is before entertaining any request for a finder’s fee or commission sharing arrangement, ask to see the parties FFC’s and if they do not have them, do not enter into any commission sharing arrangement with them.
Guy de la Porte (GDP) is an independent industrial property broker who has been specialising in the large industrial property factory and warehouse market, in the major, central Cape Town Industrial areas of Cape Town , for over 30 years: Airport Industria, Beaconvale, Epping, Maitland, Montague Gardens, Ndabeni, Paarden Eiland and Parow Industria.