Real estate sector: no rules apply
By Christopher Ram
November 28, 1999
In the newspapers for any day of the week one finds a large number of advertisements placed by estate agents many of them offering the same properties for sale. Who are these people and what does it require to become an estate agent? What are the laws governing this sector and what qualifications, characteristics and skills must the operators in the sector possess?
There is unfortunately and indeed dangerously practically nothing preventing just about anyone holding him- or herself out to be a real estate agent. Anyone so inclined simply needs to register the business' name in accordance with the provisions of the Business Names (Registration) Act Cap 90:05 to be let loose on an unsuspecting public. It is that simple.
The Government, through legislation or otherwise, plays no active or definitive role in the regulation and control of this industry. No licence is required and there are no standard rules of conduct governing the industry. Prospective real estate agents receive no guidance with regard to operating protocol and ethics, as there exists no realtors' professional trade association or other governing body.
The issue of the qualifications and training of the prospective real estate agent or broker... well, it remains an issue. There are no mandatory educational requirements and no one is required to prove competence by way of examinations or any other form of assessment. Training opportunities are, as a consequence, virtually non-existent. A real estate agent should, at the very least, understand the foundations of real estate law, and possess a full appreciation of the issues of real estate ownership and finance and tax considerations.
This astonishing lack of regulation and supervision serves as an excellent base for the abuses that have been practised in the past by established real estate agents, behaviour which demonstrates that the 'profession' is in dire need of laws and regulations aimed at providing the public with service that is efficient, intelligent and, above all, honest. Such a service can only be provided by persons who possess certain qualifications of education and character. Society should demand nothing less.
Those who think that setting standards for professions and practices is elitist would do well to recall the words of the eminent American jurist, Justice Cardoza:
"Callings, it is said, are so inveterate and basic, so elementary and innocent, that they must be left open to all alike, whether virtuous or vicious. If this be assumed, that of the broker is not one of them. The intrinsic nature of the business combines practice and tradition to attest the need of regulation. The real estate broker is brought by his calling into a relationship of trust and confidence. Constant are the opportunities by concealment and collusion to extract illicit gains... With temptation so aggressive, the dishonest or untrustworthy may not reasonably complain if they are told to stand aside. Less obtrusive, but not negligible, are the perils of incompetence... The broker should know his duty. To that end, he should have a 'general and fair understanding of the obligations between principal and agent' ...Disloyalty may have its origin in ignorance as well as fraud..."
Regulatory laws are essential to any profession, especially where the incompetent or dishonest acts of its members can have grave consequences for society at large. As a general outline, the first step towards such regulation is the requirement that every person engaging in the real estate business, whether as agent or broker, must have a licence to practise. In order to obtain such licence, the applicant must be of good repute, have a minimum number of hours of formal, approved instruction, pass an exam to demonstrate an acceptable degree of competency and undertake continuing professional education. Added to these requirements should be the provision that the continued privilege to engage in the business is based upon the condition that the licencee abides by an established code of conduct.
Having determined who may hold a real estate licence, the next step would be to provide for the effective supervision of the agents. This may properly be done by self-regulation with or without statutory authority or by way of a board or commission with the powers to make rules and regulations to implement and support the statutory authority. In Guyana we seem not to take the idea of stakeholder very seriously but Business Page advocates the inclusion of persons representing the public interest on any such supervisory body. The alternative is a closed shop of persons operating as though their first and only duty is to protect their colleagues from the consequences of misconduct.
Exemptions from any of the requirements of the statutory provisions or by-laws relating to any aspect of real estate practice should be minimal, and if possible, restricted to grandfather provisions for persons who were practising before the regulations came into operation. This is not to suggest that there should not be some form of test being applied but is simply recognition that retroactive legislation is not a good practice.
It must be remembered that laws regulating the provision of a real estate agent's licence are designed to protect the public. Thus, the statute must contain 'penalty' provisions to the effect that bad faith, untrustworthiness, incompetency or dishonest dealings shall be grounds for disciplinary action and, where warranted, revocation of the licence. The following are the grounds for suspension, revocation or fine for illegal actions applicable to real estate brokers and salesmen of the state of Utah, U.S.A:
1. Making any substantial misrepresentation;
2. Making any false promises of a character likely to influence, persuade or induce;
3. Pursuing a continued and flagrant course of misrepresentation, or of making false promise through agents or salesmen or advertising or otherwise;
4. Representing or attempting to represent a real estate broker without the knowledge and consent of that person.
5. Acting for more than one party in a transaction without the knowledge of the other parties thereto;
6. Failing, within a reasonable time, to account for or to remit any moneys coming into his possession as a broker, which belongs to others; or commingling such funds with his own or with funds not held for others in the same capacity;
7. Paying a commission or valuable consideration to any unlicensed person;
8. Being unworthy or incompetent to act as a real estate broker or salesman in such manner as to safeguard the interests of the public;
9. Failing to furnish voluntary copies of all listings and agreements of sale contracts to all parties executing the same;
10. Failing to keep a record of all transactions made which shall show the names of buyers and sellers, identification of the property, sales price, trust funds received, how trust funds received, how trust funds are held and whether used by the broker, amount of commission and to whom paid and in what amount, and which records shall be retained for a period of three years and shall be open to inspection during business hours to the director or other duly designated representative of the board or commission;
11. Failing to disclose, in the purchase of property in the name of the broker or salesman, whether the purchase is made for himself or for an undisclosed principal.
Disciplinary action is not intended to, nor does it serve as, a deterrent to the pursuit of any profession. For that matter, agents who conduct their operations in a legal and honourable manner would have nothing to fear whereas those who do not or who persist in operating close to the line of what is legal and right do no justice to the profession and need to have something to fear.
Although licensure does in fact serve to deprive an individual of the privilege of engaging in the kind of vocation that they may feel they have a natural and inalienable right to pursue, the state has a duty to protect citizens from the improper or illegal actions of others. After all, there is no such thing, neither in law nor in fact, as an absolute right.
The real estate industry is of such a public nature that it is a fit subject for regulation and the enactment and enforcement of licence laws would serve to introduce and maintain standards in a sector which has so far escaped official attention even as we hear of the shenanigans of its operators.
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