Deeds office closure hits estate agents
● SA’s estate agency industry, already under the cosh thanks to a sputtering economy, is now experiencing a cash squeeze as the closure of the deeds office and local municipalities during the lockdown means many agents cannot receive commissions for finalised sales.
Samuel Seeff, chair of Seeff Properties, says this has created a “major problem for the industry as a whole” and that the Real Estate Business Owners Association (Rebosa), of which he is a director, is urgently working with the Law Society of SA to try to get the deeds office opened “as an essential service”.
Seeff says transfer duties provide a very necessary income to the South African Revenue Service.
According to the Estate Agency Affairs Board (EAAB), there are 45,626 registered agents in the country.
Not only must all property transactions be processed through the deeds office before estate agents can be paid their commissions, but municipalities have to issue a certificate showing all the rates on the property are up to date before it can be transferred.
“There’s no doubt it will damage the industry. Estate agents already have potential cash-flow problems as a result of a few weeks’ lockdown and this will just exacerbate those problems,” says Seeff.
“The ramifications are serious. The industry is largely made up of small and medium enterprises who are either acting as independent traders or franchisees under an umbrella brand. Many of the smaller ones just do not have the financial wherewithal to be able to ride out this period.”
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, says though it is true that estate agents won’t receive commissions for recently completed deals because of the closure of the deeds office, they usually have a “pipeline” of sales stretching back some months to ensure there is cash flow.
Help from abroad
But she says if an agent doesn’t have a healthy pipeline, “the reality is it’s going to put a major strain on cash”.
Geffen says her firm is fortunate to have a partnership with an international “big brother” in Sotheby’s International Realty, which could offer advice on how to cope because it already has first-hand experience in Europe of the impact of the coronavirus.
Andrew Golding, CEO of Pam Golding Properties, says the group remains in constant contact with clients, albeit remotely via electronic means and phone calls.
“Naturally, although transactions under way can still be at least partially processed online, the fact is the market is currently, and understandably, more or less in limbo until the lockdown is lifted and transactions can be processed via the deeds office.”
He says the closure of the deeds office has effectively terminated cash flow and that until property transfers can take place, real estate agents and agencies cannot generate any revenue.
Herschel Jawitz, CEO of Jawitz Properties, says the lockdown means reduced operating costs for estate agents, but they have fixed expenses such as rent and salaries that have to be paid.
“With no registrations and therefore no commissions coming through in an extended lockdown period, it will place estate agencies in a difficult position.”
He says estate agencies are already dealing with a market that has been sluggish over the past 18 months, with “sales volumes down and nominal property price growth barely keeping up with inflation”.
EAAB CEO Mamodupi Mohlala says the organisation is “cognisant of the financial pressure that many estate agents will be subjected to due to the loss of income during the lockdown”.
Mohlala says that because of this, the regulator has extended by two months the payment deadline for continuing professional development, which requires agents to complete mandatory training programmes over a three-year cycle.