WHEN DOES A CLAIM LIE AGAINST THE FUND?
Pursuant to section 18 (1) of the Estate Agency Affairs Board Act the purpose of the Fund is to reimburse persons who have suffered pecuniary loss under certain defined circumstances. These circumstances are listed as follows:
The theft of trust money by an estate agent (Section18)
The theft must have been committed by an estate agent as defined in section 1(vi) of the Act. It is not, however, required of the claimant to prove that the estate agent in question had been issued with a valid fidelity fund certificate by the Board. There is, thus, no onus on the claimant to determine whether or not the person with whom he is dealing is a registered estate agent.
The theft must relate to trust money, which is defined in section 34 of the Act as follows:
Money or other property entrusted to an estate agent in his /her capacity as an estate agent. If money is, for example, entrusted to an attorney, not in his capacity as an estate agent but in his capacity as an attorney, no claim will lie against the fund should the attorney steal those monies. Similarly, monies paid to an estate agent for investment purpose, such as in the financial market, cannot be regarded as money paid to that person in his capacity as an estate agent since the investment of the moneys in the financial market is not a defined activity of the estate agents.
Money collected or received by an estate agent and payable in respect of, or on account of, any estate agency service and moneys, including insurance premiums, collected or received by an estate agent and payable in respect of any immovable property, business undertaking or contract for the building or erection of any improvements on immovable property. (Section 32(2) (a))
These monies will not always necessarily be entrusted to an estate agent in his/her capacity as an estate agent. For example, if a buyer and a seller who have privately concluded the sale of the seller’s property without the intervention of an estate agent, agree between themselves, that the deposit payable in respect of the purchase should be held in trust by an estate agent forthe benefit of the seller the estate agent will not receive the deposit in his/her capacity as an estate agent since estate agent was not involved inthe main transaction.
Where an estate agent’s employee steals money paid to an estate agent a claim will not lie against the fund unless the employee concerned is also an estate agent. If the theft is committed by, say, a cashier who is not an estate agent there is no claim against the fund. The firm would be held vicariously responsible to reimburse the stolen monies.
The failure of a principal estate agent to open and keep a separate trust account with a bank and /or the failure of a principal estate agent and /or persons in the service of that principal estate agent forthwith to deposit into the principal‘s trust account all monies held or received by the principal or persons in the (section 32(1)
Section 32(1) of the Act requires an estate agent to keep one or more trust account and forthwith to deposit therein all moneys held or received by that person, in the capacity of an estate agent, on behalf of any person. Monies held or received by an estate agent‘s employee on behalf of anyother person must also forthwith be deposited into the trust account.
No claim against the fund would lie if, for instance, a non estate agent cashier steals money which has already been paid by the estate agent into trust account. In such case the claimant has a claim against the firm itself or the cashier personally. It is for this reason that the Board recommends that all estate agents firms should duly assess risk and take out insurance cover to provide for these eventualities
The failure of the principal estate agent to retain trust monies in the firm’s trust account until lawfully entitled, or lawfully instructed, to make payment therefrom (section32(2)(e))
In terms of section 32(2)(e) of the Act an estate agent must retain all monies in his/her trust account until lawfully entitled or entrusted to make payment from the trust account to any person. A claim would, for example lie against the fund where the purchaser of a proposed sectional title unit suffered a loss because the developer of the scheme was liquidated before the completion of the development and the estate agent to whom a buyer had entrusted a deposit had paid the deposit from his/her trust account to the developer prior to the opening of the sectional register. Under such circumstances the estate agent will have prematurely released monies from the trust account resulting in pecuniary loss.