Property Practitioners Act set to make audit season easier for rental agents

Property Practitioners Act set to make audit season easier for rental agents

The new Property Practitioners Act (PPA) and its restrictions paved the way for house practitioners employing “accredited payment processing agents” to use for exemption from functioning their own have faith in accounts.

Now that the actual estate industry’s new regulator, the Residence Practitioners Regulatory Authority (PPRA) has finalised its ‘Guideline on audit, accounting information and believe in account requirements’ there is an possibility for property practitioners, who dread the value and administration that will come with the once-a-year audit year, to find major aid.

As a typical rule for residence practitioners, Section 54 of the PPA states that they should open up and hold separate belief accounts for their clients’ trust monies and that these accounts, furthermore the practitioner’s enterprise accounts, ought to be audited each and every 12 months.

Importantly, as per the former regulator’s necessities, these yearly audits ought to be carried out by accredited auditors.

And despite the fact that a lot of of the audit necessities and home practitioners’ duties have remained the identical, there are a several substantial variations and, possibly, a number of non permanent difficulties.

A person of these variations is the period of time property practitioners have to get their belief and business accounts audited right after their economical calendar year-close.

The audit report submission deadline has improved from the previous 4 months to a 6-thirty day period timeframe – and while that appears simple, it is not.

Whereas the new PPA came into influence on 1 February 2022 – that is, at a unique place in time – property practitioners have different money yr-ends. This suggests that in most scenarios, the successful day of the new laws does not coincide with property practitioners’ money calendar year-ends, and therefore their necessary audit reporting durations.

Transitional provisions

To address this misalignment, the PPRA introduced transitional provisions by its guideline, issued toward the finish of Might 2022.

Basically, the guideline stipulates that the submission deadline of audit reports of home practitioners will be decided by their economical yr-conclusion day:

  • If a practitioner’s economic 12 months finished on or just before 30 September 2021, the submission deadline continues to be four months right after its financial year-conclude, and the provisions of the previous Estate Company Affairs Act (EAAA) will utilize and
  • If a practitioner’s financial year finished on or immediately after 31 Oct 2021, the new 6 months’ submission deadline will implement, as will the provisions of the new Property Practitioners Laws (PPRs).

Fascination gained on rely on accounts just before 1 February 2022 will be accounted for in phrases of the outdated EAAA and interest gained on have faith in accounts on or right after 1 February 2022 will be accounted for in accordance with the provisions of the new PPRs.

Thanks to the temporary overlap of the two acts’ applicability, the guideline consists of a comprehensive desk that clarifies which act will utilize to which months of the assets practitioner’s money calendar year, as decided by such house practitioner’s fiscal calendar year-conclusion.

Read through:

As a pretty optimistic exception to the standard prerequisite of Part 54, the PPA introduces the chance of exemption in Sections 4 and 23. In conditions of Section 4, any person may, topic to distinct provisions of this segment, be exempted from compliance with any particular provision of the PPA.

Extra specially, Section 23 gives the likelihood of exemption from maintaining a believe in account underneath specified instances, and states that exempted residence practitioners’ accounting documents may perhaps bear a unique (lighter) examining method.

Regulation 2 gives even more specifics, with Regulation 2(1) outlining the instances in which this can come about, for case in point when a house practitioner:

  • Has under no circumstances obtained any have faith in monies, other than as permitted in Regulation 2(4) or
  • No lengthier gets any belief monies, other than as permitted in Regulation 2(4) and
  • Submits an affidavit to the PPRA asserting that the practitioner currently satisfies all these specifications, and also undertakes to carry on meeting these specifications going ahead.

Home practitioners would will need to undertake the application method to use for exemption as the procedure does not transpire routinely.

Regulation 2(3) specifies that a house practitioner must comply with all the earlier mentioned outlined requirements to be exempted from possessing its fiscal statements and other accounts audited.

As soon as exempted, they can have those accounts independently reviewed by a registered accountant, which will be a much much easier and more cost-effective undertaking.

House practitioners should even further use an accredited ‘payment processing agent’ to be exempted from operating their have believe in accounts, and will have to adhere to the prescribed technique

The points that surface in Regulation 2(4) explain what a compliant “payment processing agent” is:

  • They must also be a residence practitioner, from which it follows that they ought to possess a valid Fidelity Fund Certificate.
  • All of a property practitioner’s trust money must be processed by the payment processing agent.
  • The payment processing agent must run a have faith in account surroundings that complies with the act and the rules – in other phrases, a suite of diverse belief accounts for unique assets practitioners, in a solitary rely on ecosystem.
  • The over-all belief account environment, and every of the diverse property practitioners’ person have faith in accounts in just that rely on setting, ought to be audited annually. This usually means that:
    • The payment processing agent will have to empower two believe in account audit procedures: 1 for each individual of its customers (just about every assets practitioner), and a further holistic audit of all of the assets practitioners’ trust accounts, with each other in the payment processing agent’s overall have faith in atmosphere.
    • Audit reviews on the all round rely on surroundings, as effectively as particular person audit studies on every single of the property practitioners’ believe in accounts, have to be submitted to the PPRA yearly.

This points out how residence practitioners who have been exempted from trying to keep believe in accounts can be excused from formal audits and only have to have their accounting records independently reviewed by a registered accountant: the audit compliance burden was taken on by the payment processing agent.

The guideline includes 11 annexures that deliver, between some others, template affidavits in regard of trust monies that residence practitioners really should use when they implement for exemption a template audit report on have confidence in accounts a summary of fines for contraventions of the PPA and even a checklist of usually asked thoughts.

The way ahead

The PPRA has been operating by way of many problems, and we are delighted to see that the guideline offers considerably additional clarity on the above sections and rules.

We do, nonetheless, have explanation to imagine that the Independent Regulatory Board of Auditors (Irba) will quickly be talking about the proposed audit report on rely on account templates with the PPRA, right after which even more updates to the guideline may possibly abide by.

From our perspective, we are comfortable that we have met, and go on to fulfill, all the necessities of remaining a payment processing agent and additional that, as much as it may possibly grow to be vital, can employ any important alterations.

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Jan Davel is CEO of PayProp South Africa.

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