This is a direct quote from the Newsletter of Ben Groot Attorneys / Volume 2 - June 2010 

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Recently, certain articles have appeared in the press, stating that landlords and managing agents wishing to collect arrear rentals and levies have to register with the Council for Debt Collectors, in terms of the provisions of the Debt Collectors Act, 114 of 1998 (“the act”). This has led to some confusion as to when exactly it is necessary to register in terms of the act. 

The act defines a debt collector as follows: “debt collector” means a person other than an attorney or his or her employee or a party to a factoring arrangement, who for reward collects debts owed to another on the latter’s behalf.” On our reading of the definition, a person would have to register as a debt collector if he collects debts due to another person for reward, and if he is not an attorney or a party to a factoring agreement. In our view, therefore, no person who collected his own debts, for instance a landlord, would have to register. The question would then arise as to what an estate agent or managing agent has to do if they collect monies on behalf of a landlord or body corporate. We then contacted the Council for Debt Collectors, and were referred to the matter of The Council for Debt Collectors v Brunello Property Management CC, an internal matter.

In this matter, Brunello, a managing agent and estate agent was charged with contravening the act, in that it collected arrear rentals and levies and raised fees as a result of such collection, without being registered as a debt collector. Brunello denied that the Council had jurisdiction to hear the matter. The Council then had to decide whether the act applies to Brunello.

Firstly, from a reading of the definition, it is clear that estate agents are not excluded from the prohibition. It is a well established rule of interpretation that that which is not expressly excluded is therefore included in any provision. Therefore, on this basis, estate agents fall under the provisions of the act as they are not clearly excluded, as are attorneys. The Council then examined as to who are to be regarded as debt collectors. From the definition, it is clear that
(i) a person
(ii) who for reward
(iii) collects debts
(iv) owed to another on the latter’s behalf
is a debt collector.

A person includes a juristic person, but does not include a person whose only reward is his salary, for instance a landlord-company which does its own collections and employs an employee to do so. A debt is not defined in the act, but was held to be a liquidated amount of money which is due, owing and payable. Therefore, it was held that an estate agent or managing agent acts as a debt collector when they start demanding payment for rent or levies which are overdue. 

In argument, Brunello accepted that it was a managing agent’s secondary function to collect debts, and the Council held that it is this secondary function which is subject to the act. Accordingly, the moment an estate agent starts demanding payment of arrear amounts, he no longer acts as an estate agent, but as a debt collector, and is therefore required to register with the council. Where he routinely collects rentals or levies before they are due, he acts as an estate agent and not as a debt collector. The Council also adopted a very wide definition of the word “collect” so as to include even telephone calls and letters sent to a person reminding him that certain amounts are due. Accordingly, Brunello was found guilty of contravening the act. 

In light of this decision, it is clear that any person, i.e. an estate agent or managing agent, who take any steps for a landlord or body corporate to demand payments that are overdue, is busy with debt collection and will have to register with the council. As set out in the judgement, where such an agent is required to collect any arrears, he or she may instruct an attorney or debt collector to collect the arrears, or decide to register him- or herself as a debt collector.  

Also, where a landlord has an in-house management team, which manages the property and collects rent, such a landlord and the employees carrying out the work will not have to register with the council. 

We are of the view that this judgement goes too far, and that managing agents and estate agents ought to be excluded from the provisions, at least for the first steps of the debt collecting process until an attorney becomes involved. But, until further clarity exists, agents will have to comply with these provisions and this ruling.  

We hope that this clarifies the position, and any queries that may be exist. You are most welcome to contact us should you have any further queries, or should you want to obtain a copy of the judgement.

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View the opinion of the EAAB
(Estate Agency Affairs Board) on the subject of the Debt Collectors Act
debt_collectors_act_.pdf
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Link to Council for Debt Collectors
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