The Real Estate Agents Bill 2020 – passed by the Senate on May 20 – will bring sweeping changes to the industry, including the mandatory registration and licensing of all real estate agents and brokers, as well as jail time and fines for non-compliance.
The vote capped an eight-year effort by the Association of Real Estate Agents (Area) since its incorporation as the recognised body for real estate entities in 2012 to regulate an industry long known as a haven for money laundering, tax evasion and fraud.
As a result, the legislation is anchored to a set of measures designed to promote transparency, accountability and integrity in real estate transactions and protect the public against unscrupulous real estate agents and those involved in white-collar crime.
Once the President signs it into law, it will also safeguard buyers and sellers from becoming unwitting participants in financial schemes related to terrorism or other crimes.
“Without regulation, without controls real estate has been found to be one of the largest avenues in which people can launder money and support the financing of terrorism and so on,” said Area president Mark Edghill during an interview with Business Day.
Edghill also acknowledged that despite Area’s best efforts in its 30 years of operating, the real estate industry needed better ways to protect itself and consumers from fraud.
“You still have people out there who want to do their own thing entirely unregulated, so they are not happy with any legislation.”
Taken together, the provisions contained in the bill will disrupt the real estate market in a number of other important ways.
For one thing, it defines what real estate business is and is not, who can legally engage in real estate business, and it proposes new guidelines for real estate agents, developers and property managers.
While the bill defines a real estate agent as either a sales associate or broker, under the new rules, only brokers can become involved in the financial side of real estate and handle clients’ money. Sales associates can act as real estate agents but they will not be allowed to handle money.
The bill says both brokers and sales associates must be licensed and listed in public and private registers so key information about their operations are immediately known to the public and the authorities.
It also goes into details about how each conducts their business. Brokers, for example, must have separate bank accounts for client and personal business and establish fiduciary obligations to protect themselves against risk of suit for negligence.
They will be required in law to supervise their sales associates. And both brokers and sales associates must keep proper records of all real estate transactions for a minimum of six years.
There is also a special provision in the legislation that deals with developers – ironically, this includes people like Attorney General Faris Al-Rawi and other members of Parliament – who are known to engage in residential or commercial projects. Key among Al-Rawi's property interests is One Alexandra Place, an office building located in St Clair, which has been the subject of formal lease arrangements with at least two administrations. But while developers are not regulated under this real estate bill, they are required to be registered in both the public and private registers.
The private register is intended to preserve certain sensitive information from the general public but that information will still ultimately be accessible to law enforcement, the courts, and the Financial Intelligence Unit (FIU).
Under the new guidelines, a real estate agent must also be qualified to engage in real estate transactions based on a set of standards defined by the act and enforced by Area, which will become the de facto governing body for all real estate agents in TT.
Agents can be disqualified if they are convicted of a range of offences including crimes involving fraud, dishonesty or violence, or offences under the Anti-terrorism Act, the Proceeds of Crime Act or the Financial Intelligence Unit of TT Act.
They can also lose their licence if they are the subject of extradition proceedings, a bankruptcy order, or an order by a judicial authority of another country which disbars them from performing the functions of a real estate agent, developer, or an attorney-in-fact, which refers to anyone – not necessarily a lawyer – who is authorised to act on behalf of another person in business, financial or personal matters through a power of attorney.
That isn’t all. Clause 80 of the bill empowers the minister of legal affairs, a portfolio now held by the AG, to establish a code of ethics for real estate agents.
And clause three will give the FIU expanded oversight of real estate transactions in its new role as the supervisory authority for the industry.
This is widely seen as a check against a growing tide of dirty money in the local real estate industry and, in his contribution to the debate, the AG said there was sufficient statistical evidence that law enforcement was struggling to keep pace with the sheer number of fraudulent real estate transactions.
Citing contributions to GDP in real dollar terms, local real estate business, according to the AG, accounted for approximately $3.18 billion a year, with some 639 entities – a fraction of the total number of operators – registered with the FIU.
Between 2014 and 2019, said the AG, the FIU had flagged some 38 real estate transactions on suspicion of fraud with a monetary value of close to $200 million. Yet, for roughly the same period, the monetary value of the fraud cases involving land transactions in the hands of the police was only $1.79 million.
Those disparities – both in the number of registered real estate entities and in the monetary value of FIU-detected suspicious transactions and those before law enforcement – all but make the case for regulation in the public interest, according to the AG who said he had the full support of Area in drafting the bill.
Statistically, it means the police are far behind the FIU in terms of reported suspicious activity and, said the AG, the FIU is itself "far behind the market."
Edghill agreed that better data would be a welcome result of the new legislation.
“That in itself will help the public understand better what their property is worth, what the demand is for their property, if it’s a buyer’s market, if it’s a sellers market or if any particular area is in demand.”
But another key component of such registration is that it facilitates anti-money laundering declarations and other regulatory requirements aimed at combating the financing of terrorism.
Yet another positive outcome – indeed, a win for an administration, which just this month succeeded in passing the TT Revenue Authority Bill in the Senate which is intended to shore up this country’s tax receipts – is that the licensing and registration of real estate actors is likely to boost individual and corporate tax compliance across the sector.
Both the public and private registers will be housed at the Registrar General’s office.
By all indication, the Real Estate Bill is a comprehensive piece of legislation. The AG said it was predicated on a careful study of similar legislation in places such as Jamaica, the Bahamas, Bermuda and Canada.
It goes so far as to provide for the reconstitution of Area under the new act and the establishment of its board of directors. The bill also proposes the establishment of both a licensing committee and a disciplinary committee and clause 47 outlines the circumstances under which a real estate agent will be considered to have committed an act of professional negligence.
Censure for professional misconduct could mean suspension for up to two years or losing one’s license permanently.
As for penalties on conviction of a crime, both individuals and real estate businesses can face fines ranging from $150,000 to $600,000. Individuals could get jail terms of up to two years.