COVID-19 – Estate Agents – The missing link of property transactions under Alert Level 4

Real estate agencies, being a vital link in the value chain of the property sector is not permitted to operate under Government’s Regulations, Alert Level 4. For this reason, real estate agencies have called for Government to reconsider and amend the Regulations. Submissions were made by real estate sector heads and the National Property Practitioners Council to motivate for the re-opening of the real estate sector.

According to the draft framework of Government’s risk adjusted strategy dated 25th April 2020, the real estate sector is considered service providers under Alert Level 2 and can only perform their full function at that stage. Commercial real estate is permitted at Alert Level 3. Currently, if there is any activity in the real estate sector, it is restricted to operating via telephone calls and in the virtual space, which is unsatisfactory to sellers and prospective buyers alike. As buying a home is one of the biggest commitments individuals would most probably make in their lives, it is natural that they will first want to physically view the property before making an offer, but real estate agents are not allowed to take potential buyers to physically view a property during Alert Level 4.

As proposed by estate agents and property councils, government should reconsider and amend the Regulations to allow estate agents to perform or at least support essential services in line with the opening of the Deeds Offices countrywide under Alert Level 4. This does not only affect the thousands employed within the real estate sector, but has an impact on the economy as a whole. The real estate sector feeds the property market and by doing so stimulate other industries, organisations and businesses such as banks, valuers, mortgage originators and conveyancers.  As such, there should be an alignment allowing real estate to support other Alert Level 4 essential – and professional services which are permitted to operate. Without estate agents, these industries, organisations and businesses risk coming to a standstill. There will be a knock-on effect which will be detrimental to the South African economy should the Regulations not be amended.

During the Level 5 lockdown period, almost no property transactions were concluded. The property sector came to a standstill. As is, it is anticipated that there will be a decline in the number of real estate transactions due to COVID-19. The fact that estate agents are unable to facilitate property transactions during lockdown worsen the position. As mentioned, estate agents are essential to enable the rest of the value chain in the property market to operate.

In terms of the Regulations issued under Alert Level 4, Deeds Offices have been permitted to resume with operations since 1 May 2020. Professional services such as conveyancers and the banking environment in support of Alert Level 4 essential services are also allowed to operate. Deeds Offices opening countrywide on 13 May 2020 is positive news for homeowners who have concluded property transactions prior to or even (but unlikely) during the lockdown as these transactions can now be registered at the Deeds Office. Sellers will receive payment of the proceeds of these sales and estate agents will earn commission.

The Regulations under Alert Level 4 do not explicitly state that estate agents are allowed to carry out inspections, but some have interpreted it to mean that agents may perform inspections for outgoing tenants as it is essential to refund deposits. This interpretation has seen estate agencies registering themselves at CIPC as essential services to perform this specific duty.

The National Property Practitioners Council has made recommendations on how the real estate sector could implement safety measures to reduce the risk of spreading the virus. The real estate sector can operate with a very low risk of spreading the virus. Estate agencies can ensure that their workplaces, have the required protocols in place to ensure strict compliance with the Regulations by adhering to temperature screening, face masks, sanitising and social distancing.

Furthermore, estate agents have not received income for some time.  They only receive commission once a transaction has been registered, which takes approximately 3 months from the date of conclusion of the sale. The postponement to only allow estate agents to operate fully until Alert Level 2 will no doubt have a dire financial impact on them. They also do not qualify to receive UIF as their income is commission based.

Should Government agree to the amendment of the Regulations under Alert Level 4 to permit the real estate sector to operate as an essential service, then the Regulations should include that the estate agencies can register themselves as essential services with CIPC and obtain permits to operate. The agency should then provide permits to the estate agents to perform their functions.

President Ramaphosa addressed the nation on 13 May 2020 and announced that business activity will be expanded allowing certain changes to Alert Level 4 Regulations. We wait in anticipation with a ray of hope that due consideration be given to the real estate industry to commence business.

Lavashnee Mandry
Senior Associate | Property Attorney