Franchising and the New Property Act
Franchising manages a narrow escape in the New Property Act
This is an updated article to the article previously published on the D’Amico Incorporated website.
In the Property Practitioners Bill which preceded the Property Act, section 64 dealt with franchising. It stated that the Property Practitioners Regulatory Authority, which now replaces the Estate Agents Affairs Board, may hold a Franchisor responsible for any prohibited or sanctionable conduct of the franchisee. Thankfully, this was not carried forward into the Property Act.
Section 65 of the Property Act deals with franchising and fortunately does not make a Franchisor liable for any sanctionable conduct made by a Franchisee. If section 64 of the draft bill had been carried forward to the Property Act, this would have been draconian and would have resulted in a Franchisor needing to “police” the conduct of a Franchisee to avoid liability.
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. The Property Act is not yet in force. The date when it applies, will be promulgated in the Government Gazette. Until then the old Act applies.
Section 65 of the Property Act provides that Franchisee Property Practitioners (currently called Estate Agents):
- may not carry on business under the name of a franchise unless they are the holders of Fidelity Fund certificates; and
- must disclose in all communication and marketing material, that they operate in terms of a franchise agreement, as well as the name of the franchisor.
Direct reference to franchising in new legislation shows the impact that franchising is having on business.
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This article has been compiled for information purposes only and does not constitute legal advice. Legal advice needs to be tailored to the specific needs and circumstances of the case on hand. It follows that D’Amico Incorporated cannot accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act on the basis of this information.