New Property Act affects Franchising
The Property Practitioners Act, no 22 of 2019 (the Property Act), was signed into law by President Cyril Ramaphosa on the 3rd of October, 2019, which replaces the Estate Agencies Affairs Act, no 112 of 1976.
In the Property Practitioners Bill (which was in draft form prior to the Property Act coming into effect), section 64 dealt with franchising. Sub-section (4) stated that the Property Practitioners Regulatory Authority, which now replaces the Estate Agents Affairs Board (the Authority) may hold a Franchisor responsible for any prohibited or sanctionable conduct of the Franchisee to the extent that the Franchisee is responsible in terms of the Act. Thankfully, this was not carried forward into the Property Act.
Section 65 of the Property Act deals with franchising and does not make a Franchisor liable for any sanctionable conduct made by a Franchisee. Had section 64(4) [as mentioned above] of the draft bill been carried forward to the Property Act, this would have been draconian and would have resulted in a Franchisor “policing” the conduct of a Franchisee.
Section 65 of the Property Act provides that a franchisee property practitioner:
- May not carry on business under the name of a franchise unless s/he, it is the holder of a Fidelity
Fund certificate; and
- Must disclose in all communication and marketing material, that it operates in terms of a
franchise agreement, as well as the name of the franchisor.
The Authority may withdraw the Fidelity Fund certificate of a franchisee property practitioner who carries on business in contravention of point 1 and/or 2 above.
The fact that the legislature now refers directly to franchising in new legislation shows the impact that franchising has on the commerce in South Africa.
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