Estate Agency Inspections
Good day client,
We have been overwhelmed with enquiries from our estate agent clients as to a flush of inspections by the EAAB recently. We have also been attending a seminar on Estate Agency Trust Accounts and therefore thought it beneficial to give some feedback in this regard and keep you up-to-date with the process.
As a result of the recent fraud indicators in the industry and the wide media coverage that it received, the flashlight was focussed on all estate agencies and the handling of their trust affairs.
The Estate Agency Affairs Board and the Financial Intelligence Centre started conducting joint inspections of randomly selected Agencies with a view of determining whether the provisions of the Estate Agency Affairs Act [“the Act”] and the Financial Intelligence Centre Act [“FICA”] are being, and have been complied with.
The inspections take place at the agencies offices and will be undertaken by duly authorised inspectors who have been appointed by the Board and who will be acting in accordance with the powers granted to such inspectors pursuant to the provisions of section 32A of the Act.
The Board intends during the course of the proposed inspection, ascertain whether you have duly complied with:
- Section 26 of the Act in that all estate agents in your service are properly registered and have been issued with valid fidelity fund certificates by the Board;
- Section 29(a) of the Act in that the accounting books and records fairly reflect and explain the state of affairs and the financial position of the company;
- Section 29(b) of the Act in that accounting records have been duly audited and statutory auditor’s report timeously submitted to the Board;
- Section 32 of the Act in that all trust banking accounts are properly opened, designated, maintained, balanced and reconciled;
- Section 34B (1) of the Act in that all candidate estate agents in your service did not complete or draft the specified documents or clauses in such documents; and
- Section 34B (2) of the Act in the event of any non-compliance with section 34B (1);
During the inspection, in addition, all contracts of sale, lease agreements and written mandates concluded by the firm will be inspected to verify that such documents comply with, inter alia, the Code of Conduct for Estate Agents and the provisions of the Alienation of Land Act and any other relevant legislation, where applicable.
The Financial Intelligence Centre, for its part, intends to satisfy itself that the provisions of Financial Intelligence Centre Act have been complied.
The EAAB then requires the agent to complete a questionnaire such as the example given below:
Principal’s questionnaire in terms of Inspection procedure 4.7.
- Have you ever been dismissed from a position of trust due to improper conduct? Give details and advise if, how and when this was disclosed to the EAAB;
2. Have you ever been convicted of an offence involving an element of dishonesty? Give details and advise if, how and when this was disclosed to the EAAB;
3. Are you an un-rehabilitated insolvent?
4. Have you had your Fidelity Fund Certificate withdrawn by a committee of inquiry in terms of section 30(3)(a) of the Act?
5. Have you ever made a special application in terms of section 27 of the Act to the EAAB for the issue to you of a Fidelity Fund Certificate? Please provide details of the reason for such application and the outcome thereof;
6. Do the assets of your estate agency business exceed the business’s liabilities?
7. Do you intend, in the near or foreseeable future, to close or sell your estate agency business?
8. Is your business currently being wound up?
9. Do you anticipate that the business may be liquidated or otherwise dissolved in the foreseeable future?
10. Please describe the nature and amount of any litigation against your estate agency firm?
11. Please give full details of any judgments or monetary awards made against your firm in the last three years?
12. Do your personal assets exceed your personal liabilities at this point in time?
13. Do you anticipate that you or your spouse may be sequestrated in the foreseeable future?
14. Have you been diagnosed with any terminal or life-threatening illness?
REQUIREMENTS FOR INSPECTION ON BEHALF OF EAAB
The inspectors then ask you to have the following documents available at the time of the inspection and have the required documentation filed in accordance with the procedures:
Fidelity Fund Certificates for :
- Estate Agency (C)
- Cipro documents (C)
- Fidelity Fund Certificates for :
- The principle member(s) (C)
- Non-principle members in service (C)
- All candidates (C)
Copies of id’s of each Fidelity Fund Certificate holder attached to the FFC.
- A list of all employees which do not hold fidelity fund certificates (ie are not employed as agents). (C)
- A list ALL estate agents receiving commission from the agency. (C)
- A payroll summary for the last 6 months reflecting who earns commission and who does not. (C)
- Access to Estate agencies trust account(s) statements; monthly trial balance ; cash books; debtors/creditors age analysis (reflecting monies held in trust/on behalf of clients) – For 6 individual months prior to the date of inspection.
- A list of ALL trust accounts in the name of estate agency. (C)
- A letter from the bank showing all trust accounts and business accounts indicating that trust accounts and investment accounts are held in terms of section 32(1) and 32(2) of Act 112 of 1976.
- Bank statements of the Agency (Trust and savings for six months prior to inspection, Business accounts for twelve months prior to inspection date.)
- Access to accounting records of ALL trust accounts (cash books and bank statements) (For 6 months prior to the date of inspection)
- Monthly general ledgers and reconciliations of ALL trust accounts. (For 6 months prior to the date of inspection.
- All written mandates received from clients relating to the treatment of interest earned on trust accounts in terms of section 32(2)(c). (C)
- IT3(b) certificates from the bank for interest earned on the Trust accounts. (C)
- Most recent Audited Trust account certificates. (C)
- Signed financial statements for the current financial year. (C)
You will agree from all the above-mentioned, that the risk have increased on the side of the auditor and that we have to perform more procedures than normal. We intend to take a stand not to audit the trust account of an estate agent, unless we have insight into the business side of the agency as well, as these two components should be treated as a whole.
We will keep you up to date with any new information that comes to our attention.
Maryke Enslin CA (SA)