Bullet Points on Legislation to highlight how Real Estate Practice will be impacted or changed

BACKGROUND TO REAL ESTATE LEGISLATION  |  Since 1990, AREA has worked on draft Legislation to regulate the Real Estate industry, and with the help of the Attorney General’s office from 2017, we finally got our Bill passed on June 1, 2020.

The drafters of the Bill had access to all AREA regulatory documents from the Constitution, By-Laws, Rules & Regulations, to the Code of Ethics & Standards of Practice.

Although passed in June 2020, the Act has not yet been proclaimed so AREA is still the only National Regulatory body at this time. 

WHAT HAPPENS WHEN THE ACT IS PROCLAIMED  |  The Registrar General must set up 3 Registers for mandatory registration of all practising and FIUTT registered Brokers, Sales Associates and Land Developers.

A new National Regulatory Association of all Real Estate Agents (AREATT) must be established according to the Act and every FIUTT / Registrar General registered Agent must become a member of this professional Association, even if they are already a member of AREA.

Every applicant for registration will be published in the Gazette and the public given time to object before the Registrar General completes the registration process.  Twenty-one (21) days are allowed before a Certificate of Registration is issued and agents are not permitted to practice during that waiting period.  

After registration, every Broker-Level Agent must apply to a Special Committee for an annual Licence to practise Real Estate.  Sales Associates do not have to be licensed since they are not permitted to handle money as part of the transaction.

Sales Associates are permitted by the Act to practise on their own regardless of their experience or qualifications, unlike AREA rules that stipulate a Sales Associate must work at least two (2) years under the supervision of a Broker.

Every practising Agent must take out Professional Insurance cover in the event that they breach any clauses in the Act or FIUTT Legislation and are fined, or if they are sued by any party during a transaction.

WHAT ARE THE QUALIFICATIONS FOR REGISTRATION?  |  These are not yet announced by the Registrar General’s Department but we expect them to be similar to AREA’s qualifying standards. AREA has offered to assist the Registrar General due to our 30 years regulatory experience and our copyright courses presented by UWI/Roytec.

WHO HAS TO REGISTER WITH THE FIUTT AND THE REGISTRAR GNERAL?  |  Every practising Agent in the country and every Land Developer who sells plots of land must be registered by law with both of these bodies or they will commit an offense that carries a heavy penalty. 

Registration with the FIUTT is governed by its own set of legislation dating from 2010 and is available on the FIUTT website. 

HOW WILL THE PRACTICE OF REAL ESTATE BE REGULATED ONCE THE ACT IS PROCLAIMED?  |  By the Trinidad & Tobago Association established by this Act (AREATT) but no details of its governing laws, rules or codes is yet known.    AREA continues to offer to work with the office of the AG to help establish this new Association and ensure it is set up in line with existing industry practices.

HOW WILL THE NEW ASSOCIATION (AREATT) BE GOVERNED?  |  Similar to AREA, it will have a volunteer elected Board of Directors and its work will be carried out by a series of Standing Committees, the most important of which will be the Disciplinary & Ethics Committee. The composition of this Committee has been set out in the Act.

The Impact on AREA and its Membership now and in the future

WILL AREA TRANSITION TO BECOME THE NEW ASSOCIATION AREATT?  |  Although that was AREA’s intention, the office of the Attorney General saw fit to use the Act to establish a new Association. AREA can do little more at this stage than offer to help achieve a seamless transition from no mandatory registration and licensing to a total registration and partial licensing system handled by the Registrar General’s Department.

WILL AREA DISSOLVE THE ASSOCIATION ANY TIME SOON, BUT CERTAINLY ON PROCLAMATION OF THE ACT?  |  No.  AREA is an established regulatory body incorporated by Act of Parliament in 2012 and enjoys at this time the largest membership it has ever had.  AREA will continue to regulate the practice of its membership, assist Government to the extent that it is invited to do so, and offer the educational opportunities for which it excels.

WILL EXISTING AREA MEMBERS HAVE TO REGISTER WITH THE REGISTRAR GENERAL?  |  Yes.  Every single practicing Real Estate Agent must register.  It will be the choice of existing AREA members to remain members of our respected Association in addition to registering with the mandatory Association whose exact function and credibility is yet to be determined.

IS AREA SATISFIED WITH THE PURPOSE AND INTENT OF THE NEW 2020 ACT?  |  Not entirely.  Much of the Act is based on the AREA draft, but changes were made that AREA realizes are going to prove challenging to existing best practices. In addition, certain clauses are contradictory and make it impossible to achieve some of the stated purposes of the Act.

With the new Act, there is an emphasis on keeping sales records and reporting of personal income as an Agent which is nothing to do with the practice of real estate. 

The Act seeks to give AREATT responsibility for policing and enforcing FIUTT laws which is not the function of the Association :

“AN ACT to provide for the registration and regulation of Real Estate Agents in order to promote transparency, accountability and integrity in the Real Estate profession, to protect and assist persons engaged in transactions with Real Estate Agents and to assist in the detection and prevention of money laundering and terrorist financing, and other related matters.”

HOW WILL AGENTS TRANSITION BETWEEN NO REGULATION AND REGULATION BY THE ACT? | The Act states in Clause 83 that practicing Sales Associates and Brokers will be allowed to continue to practice real estate without registration or licensing for a period of 12 months and 18 months respectively, from the date of commencement of the Act.  However, the definition of Sales Associate or Broker really applies only to the minority of Agents registered with AREA.  Agents operating outside of AREA have no such formal title so it remains a grey area as to how they will classify themselves.  Presumably that will be the function of the process of application for registration with the Registrar General’s Department.

CHANGES IN BEST PRACTICES PROPOSED BY THE ACT | The relationship between Broker and Sales Associate as established by AREA is significantly altered by the Act.  Agents will no longer have to apprentice themselves to a Broker until they have a minimum level of experience.  Working alone or with a Broker becomes optional. 

For example, Clause 5 States :

(3) A person engages in the business of a broker where he:-

(a) Supervises a sales associate who represents a client;

(b) Receives client’s money; or

(c) Manages the financial aspects of real estate business.

(4) Notwithstanding subsection (3), a broker may engage in the business of a sales associate.

However :

(5) A person engages in the business of a sales associate where he engages in the non-financial nature of real estate business.

This is repeated in Clause 75 which makes it an offence for a person who is not a Broker to receive or handle client’s money.  A Sales Associate is defined, therefore, as a person registered to practise real estate who is not a Broker, has no licence, and cannot handle client money  That’s it.

Even more confusing is that Clause 49 imposes an obligation by definition on the Broker to supervise Sales Associates, but only in his employ.  

“A broker shall supervise a sales associate in his employ to ensure that the sales associate performs his functions competently and in compliance with this Act.”

Since the majority of Agents will almost definitely be independent of a Broker under the Act, this means that few Sales Associates will be supervised or monitored.  Even if new to the profession, they are not required to undergo an apprenticeship or internship.  What protection will this afford the general public using the services of a rookie Agent working alone?  It will also increase the work of the FIUTT who will have to audit these unsupervised, unmonitored agents.

SUPERVISED VERSUS INDEPENDENT SALES ASSOCIATES | Precedent shows that the majority of Agents will choose independence and therefore miss out on the most effective supervision AREA built into its regulations, that of working under a Broker Mentor for two years prior to working solo.

How does this match the stated purpose of the new AREATT Association?  Clause 24 sets out some of those purposes as follows :  

(a) to improve the standards of conduct and proficiency of real estate agents in Trinidad and Tobago;

(b) to promote compliance of real estate agents with the Code of Ethics;

(c) to represent, advance and protect the interests of real estate agents in Trinidad and Tobago;

(d) to promote the exchange of views among real estate agents;

(e) to develop initiatives for the efficient and effective delivery of real estate services to the public;

(f) to protect and assist the public in Trinidad and Tobago in all matters relating to real estate business; (g) to promote good relations between real estate agents and build better relations with the public in general;

To achieve these aims, AREATT must have the ability to monitor the performance of all member Agents in the country.  But if Sales Associates are permitted to work alone even as a novice agent with zero experience, how can monitoring be achieved by the remote Board of Directors?

It is felt that this retrograde step will perpetuate the present weakness of AREA, that of being able only to regulate its membership while the majority of Agents work unsupervised outside of the Association.  This is one of the prime reasons AREA sought legislation, to allow it to regulate the entire industry under one set of rules and one code of ethics and Brokers responsible for less experienced Sales Associates. 

WHAT IS UNLAWFUL PRACTICE? | Clause 7 (1) defines ‘Unlawful practice’ of real estate as practise without being registered.  This is another contradiction or confusion since the Act also states that a Broker cannot practise unless licensed.   Which is it?

Furthermore, a Sales Associate even if working independent of a Broker, can practise without a licence, provided he does not handle client money.  How will that work for the independent Sales Associate not working under a Broker and handling their own transactions from start to finish?   What value is the licence?  What is it purpose?  It is described in the Act as a certificate for display in an office, but AREA has always envisaged it as a form of ID to be shown to clients and buyers.  In other jurisdictions, ALL AGENTS must be licensed, not just some of them. 

Transparency  |  Not licensing Sales Associates deprives the public of ID/licensing of non-Broker agents.  This is counter to one of the stated purposes of the Act to promote transparency and protect the public.  

Handling of Client Money  |  This may be the biggest confusion in the Act which makes a clumsy attempt to keep Agents’ hands off deposit cheques.  It has resulted in the redefinition of terminology (Broker and Sales Associate), function (financial or non-financial), practice and re-writing of Regulations and course books etc.   

All these changes and resulting confusion are because an agent MAY RECEIVE A DEPOSIT cheque from a buyer and pass it to an attorney to hold in escrow. Because most Agents do not act as Stakeholders, nor work for a Broker, nor operate escrow accounts. So misuse of buyers’ money is hardly an issue – as compared, for example, with the lack of supervision of inexperienced Sales Associates and the danger that poses to the public. 

LICENSING OF BROKERS | This is done via application to the Licensing Committee: 40. (1) All brokers are required to be licenced under this Act.   However, the next clause adds: (2) Where a sales associate wishes to also operate as a broker, he is required to apply to the Committee for a licence.

By definition, a registered Sales Associate cannot be licensed as a Broker. He/she would first have to apply to the Registrar General for re-registration as a Broker with the higher qualifications required, and only if so registered could an application be made for a licence. The applicant for a licence would therefore always be a registered Broker, not a Sales Associate. The Act is once again confusing.  

THE LICENSING COMMITTEE | Clause 30 of the Act mandates that the members of the real estate licensing Committee will be largely Attorneys.  Since they belong to an entirely separate profession, AREA cannot see their relevance to how real estate is practised.  Licensing should be the decision of experienced Brokers with detailed knowledge of the profession. AREATT may recommend representatives for the committees but is not empowered to actually select or appoint its own industry representatives. 

The Bill allows for this Committee of Attorneys with two, perhaps junior, Agents on it to decide if a Sales Associate is fit and proper to be given a licence.  Since Licences only go to Brokers, that is the same as saying that the Committee of Attorneys will have the power to evaluate the suitability of a real estate agent to become a practising Broker.  In reality a Sales Associate will first have to apply for re-registration as a Broker and then apply for a licence to practise.

Clause 32 (2) says there will be no control exerted over the Licensing Committee, but it is by definition a political appointment, with paid appointees. AREATT may recommend representatives for the committees but is not empowered to appointment its own professional representatives. This is not how co-regulation works.

The composition of both the Licensing and the Disciplinary Committees fail to or at best unfairly represent the best interests of the real estate sector which they purport to represent and regulate. The dominance of another profession other than real estate is abnormal and detrimental to the real estate industry that is supposed to be regulating itself with the support of government – not at the mercy of another profession entirely.

Qualifying Real Estate Courses  |  Clause 5 (a) (v) – indicates that the Minister of Finance may select what is an accredited course for registration and licensing purposes. Once again, this is inappropriate intervention and interference and does not constitute co-regulation.

Professional Indemnity Insurance  |  Clause 28 requires that an Indemnity Insurance be in effect and monitored by the Association.

Excessive fines and penalties  |  AREA questions the legality of penalties and punishment that bears no relationship to the severity of the crime.  Even the word crime is inappropriate for failing to display a registration certificate for example.   The Act will easily criminalise Agents.

SUMMARY 

These are some of the most significant impacts, challenges and inconsistencies of the Act as presently drafted. 

Co-Regulation of the Real Estate Sector appears not to be the aim or purpose of this Act which generally fails to legislate for co-regulation. The new association AREATT is not built in to the information loop where the Registrar General is concerned and Clause 79 (1) fails to require the Registrar General to consult with AREATT on how to manage the registration of its own professional Agents. The composition of Committees is imposed on the Association and the profession. 

While being read in the House, many if not all these points were objected to by the Opposition supported by AREA, but with a safe majority vote, the AG was able to ignore all objections.

Once the Act is proclaimed, AREA will be in a position to appeal, lobby, object as appropriate to those clauses in the Act that are detrimental to the practice of real estate. Or not properly thought out and inconsistent within the Act itself.  Or not in the best interests of our industry or of the general public it seeks to protect. It may even be unconstitutional in part, perhaps illegal.

If you have questions on the new regulatory Act, please contact:

Convener, Taxation & Legislation Committee

Dawn Glaisher  |  seajadeinvestments@gmail.com