Published Thursday 2nd September, 2004

This week we delve a little more deeply into the business of Real Estate by examining AREA’s proposed legislation to control the industry.

Ms. Patricia Lazarri, AREA’s president, in a recent ‘Newsday’ article, outlined the benefits the new system would bring to the consumer and we are engaging those points here.

The Bill is available from AREA at http://community.wow.net/area/ and its stated aims are the protection of the consumer by creating a regime of examination and licencing for practicing Real Estate Agents with a Compensation Fund to cover losses suffered by complainants.

We should make it clear that we do not support this proposed legislation in any respect and some of our reasons are set out here –

• Necessity – Has there been any public demand for regulations of this type? In a nation where there is the perennial problem of non-enforcement of all sorts of essential legislation, from traffic regulations to building regulations, it can scarcely enhance the respect for law to introduce further laws which are likely to be honored more in the breach than in their observance. In fact, our preliminary inquiries with the Ministry of Consumer Affairs indicate a very limited number of complaints in this area. The question of public demand is somewhat unclear. Given the present legislative logjam on priority matters – remember the ‘Anti-Kidnapping Bill’? - and the poor enforcement of the existing property-related legislation, it is straining credibility for any body, claiming to be ‘The Property Professionals’ to seek the support of our legislature on such marginal matters.
   

• Appraisals – At 13. in Part 2 – Relations to Clients - we are told that a real estate broker can offer ‘…a formal appraisal of real property…’ and further that this service should attract ‘…a fair charge…’. This aspect needs to be treated with extreme caution since a probable reading of this clause in the context of the Draft Bill could be that the real estate person, once licenced by the Board, becomes qualified to value property. The established local practice of our Courts, Government Departments/State Agencies, Financial Institutions and Commercial Sector is to obtain the services of a qualified Valuation Surveyor whenever it is necessary to value of a property. It would be a major retrograde step to create a fresh class of licenced ‘appraisers’ who would be free to practice.
   

• Examination for Licencing – At 13., the Board’s power “…to appoint a Board of Examiners…” is set out and we need to ask what is the competence of a Board of attorneys and real estate agents to validate competence to practice? To take the example of Land Surveyors, who are regulated by the Land Survey Board, established under Act No. 33 of 1996, that Board is comprised solely of Land Surveyors. What justification could there be to have real estate practitioners regulated by a mixed Board? Surely it is normal practice to have professionals judged by their peers?
   

• Complaints – The Registrar’s duties in respect of complaints, as set out at 33. (3), appear to be limited to notifying the person against whom allegations are made. This is fundamentally flawed and contrary to the rules of natural justice. The complaint must be copied to the alleged offender.
   

• Duty of Care – At 33. (1) ‘…any person who is aggrieved…’ can make a written complaint to said Registrar. This would enlarge the number of persons who can make inexpensive, compensatable and potentially damaging claims against practitioners. Any person. At present, the only person having the locus to sue an agent is the client. The patience of the Registrar, the depth of the compensation fund and the patience of members in this proposed scheme of compulsory registration would all be sorely tested by these proposals to broaden the pool of claimants. Despite the high costs of the administration of justice, we all know that our Courts are barely able to keep pace with events. If this is progress, the price is really high.
   

• Enforcement – The Draft Bill sets out a number of protective measures for use in cases where licenced members are in breach of the legislation. We have already outlined our concerns on the operation of the proposed compensation fund. If the real estate profession wants to be viewed as responsible stakeholders in today’s increasingly consumer-oriented environment, practitioners should be required to hold Professional Indemnity Insurance in respect of advice tendered and post bonds in respect of funds held on trust in proportion with the volume of their turnover. The present position is that only a few real estate brokers hold Professional Indemnity Insurance as a measure of protection to their clients.
   

• Arbitration – At Part 1 – Professional Relations – in para 2. we are given an ambiguous picture of the preferred manner of dispute resolution. Members are seemingly obliged to seek arbitration first, with a lawsuit being the last option. The end of that sentence advises that decisions in such arbitrations are final and binding. If this is indeed the case, why mention the Courts?
   

• The Consumer First – The stated objectives of “licencing, regulation and control….” Would be better achieved by adopting the alternative approach of ‘negative licencing’ as practiced in the United Kingdom under the Estate Agents’ Act 1979. Under this system no licences are issued. There has been an intense programme of public education by the respective professional bodies and the State to better inform consumers on what to look for before selling or buying property. If a serious consumer complaint is upheld the authorities have the power to issue a Prohibition Notice to ban a rogue agent; there are serious penalties for breach of these notices. Although there are still imperfections, this scheme has the merit of focussing scarce State resources on the few against whom serious complaints have been lodged. In our view this is far superior to the present proposals which would oblige the Board to spread itself over the entire range of these activities.

In our view, the efforts put into this draft Bill might be better expended on a program of public education rather than these limiting measures. This is the very heart of the matter and it is here that the Bill’s core intentions might be deduced. Is the purpose of this Bill to create a ‘closed shop’ or is it to protect consumers of services from rogue elements in the Real Estate sector? It might well be that under the impending FTAA, we would be, by treaty, prevented from implementing such protective measures.

Next week we begin an examination of our land-use planning system and its impact on the real estate industry.