Conform or reform? That is the question

Our society generally underestimates the value of realtors and the real estate industry to national development, growth and prosperity. We fail to recognise that almost every single new investment has to have some connection with land and buildings. Whether it is the new investor in tourism, agriculture, the BPO industry, and manufacturing, new professionals in law, medicine, accounting, management consultants, or simply, whatever, they will all require land, factory space or office space.

Your industry represents the experts. It is to realtors that members of the public will first turn for expert advice and guidance in finding the appropriate solutions for their physical space requirements. A huge amount of trust and reliance is reposed in your members. This enormous trust by members of the public demands a high degree of integrity and professionalism from you all.

The topic of this paper is a parody of the famous words of William Shakespeare in the play Hamlet, “To be or not to be, that is the question”. In June 2018, in Jamaica, you, the members of this association, are members of integrity, repute and good character. It was not always so. There was a time, not so long ago, when you were reviled, treated as the lowest bottom feeders in society. Simply, you were not to be trusted.

In the period of the mid-1970s to the late 1980s, members of your profession were reviled and viewed as hustlers or. in 21st century parlance, “scammers”. Perhaps, the most famous case was that of Lloyd Gibson who operated Lloyd’s Real Estate and Rental Bureau Limited on Old Hope Road. The allegations as reported in The Gleaner of 3 December, 1980 were that:

“Gibson, over a period in 1976, received sums of money from persons wishing to buy land and homes, but that they received neither the land nor the homes and their money was not refunded. The police were called in and he was traced to Fort Lauderdale, Florida”

Gibson was extradited from the USA to Jamaica and was tried and found guilty and sentenced to two years’ imprisonment at hard labour. He appealed to the Court of Appeal in Jamaica and his appeal was dismissed. In the headnote or summary of his appeal in the Jamaica Law Reports the following is stated:

“The appellant was Managing Director of Lloyd’s Real Estate and Rental Bureau Limited and Lloyd’s Property Development Company Limited. The first named company was engaged in the buying and selling of real estate. The second company was engaged in the development of 2 sub-divisions. The appellant at all times exercised sole and exclusive control over the companies’ affairs.

Between October 1975 and April 1977 deposits from six complainants were paid to the first named company on account of lands the appellant falsely advertised he had authority to sell.  The deposits, except for one, were all paid to the second named company whose business was the appellant’s personal sub-divisions and which had nothing to do with that of the first named company. The deposits were paid to the appellant’s staff and not the appellant personally, who was frequently out of office.

None of the sales were concluded and the complainants demanded refunds. They were repeatedly requested, mostly by the appellant’s staff, to return at later dates. The appellant, without making any refunds, left the jurisdiction in about April 1977 to live in Florida, U.S.A. with the company secretary of both companies. He did not return until his extradition from the U.S.A. in 1980 when he was charged with six counts of fraudulent conversion contrary to s.24 (i) (iii) (a) of the Larceny Act.

In addition to the complainants’ evidence, the Crown also relied on the evidence of the appellant’s company secretary and two other employees. The appellant, in an unsworn statement, maintained that (1) he never had any dealings with any of the complainants except one, and none had requested from him personally a refund of their deposit and (2) his offices were closed because of political violence and not any intention to deny the refunds which he was financially able and willing to make.  

The appellant was convicted on all six counts and sentenced to two years’ imprisonment with hard labour. He appealed, maintaining, inter alia, that (1) no intent to defraud on his part at the time the deposits were paid was proved and (2) the evidence of the appellant’s former company secretary could not be corroborated in every material particular by that of the other two employees and the former company secretary had an interest to serve, namely her own.

Held: (i) where a person by his words or conduct induces another to deposit money with his company on a basis which he knows to be false which deposit would not otherwise have been made and that person intends to use the depositor’s funds for purposes other than those represented, the intention to defraud is established notwithstanding that the person inducing the payment may honestly intend to repay the money and even have good reason to believe that he will be capable of doing so.

Gibson’s case did not represent a unique or singular experience in those troubled years. It was against this background and to torrid state of affairs that your beloved profession began to be formally regulated.

The Real Estate (Dealers and Developers) Act (hereinafter called “The Act”) was promulgated on the 1st day of September 1988. It created a regulatory regime whereby for the first time members of the profession were made subject to a regulatory regime.

Section 5 of the Act is as follows:

“5. The functions of the Board shall be to regulate and control the practice of real estate business, the disposition of land in development schemes and the operation of such schemes and, without prejudice to the generality of the foregoing, the Board shall have power-

 

  • To consider and determine applications for-
  • Registration as real estate dealers and real estate salesmen; and
  • Licences and renewal of licences to engage in the practice of real estate business as real estate dealers and real estate salesmen;
  • To monitor the activities of developers;
  • To make enquiries and collect information as it may think necessary or desirable for the purpose of carrying out its functions;
  • To hold and conduct such examinations of applicants for registration as real estate dealers or real estate salesmen as it thinks necessary or desirable; and
  • Generally to take all such other lawful measures as it may consider necessary or desirable to assist it in carrying out its functions under this Act and in protecting the mutual interests of persons entering into land transactions.”

 

These bare statutory bones are augmented by an institution (The Board) with rules and regulations, inspectors, auditors and a full regulatory oversight mechanism. The Board screens applicants for entry into the profession. It engages in continuous regulation of its members. It led to the promulgation of a Code of Ethics for your profession. It provides for a disciplinary framework for those whom it oversees, and mandates and enables continuous education for members of your profession. Simply, it seeks to ensure compliance by your members with the law. Compliance is required both to ensure that members of the public have a level of comfort when treating with realtors, but to ensure that realtors have met and continue to meet all of the statutory minimum benchmarks for the profession.

A liberal, free trade, capitalistic economy such as ours demands on the one hand that there are very few impediments to entry into commerce or structured organised business. On the other hand it equally demands that practitioners, whether bankers, financiers, insurers, accountants, lawyers, realtors and others are subject to robust regulatory environments so that the public interest is protected.

The regulatory framework for your industry, introduced in the late 1980s/early 1990s, soon proved to be partially unable to regulate an industry that has continued to grow and develop. The late 1970s into the early 1980s saw the development and growth of the transnational narcotics trade in Jamaica. This led to its kingpins having large amounts of cash that needed to be legitimised or laundered. The principal method of doing so was through the acquisition of real estate, and real estate professionals and lawyers were the primary facilitators of this cleaning.

Action and reaction! In time Parliament enacted the Money Laundering Act. This was soon discovered to be woefully inadequate. Parliament got back into action and the Proceeds of Crime Act (POCA) was enacted.

Section 92 (1) of the Proceeds of Crime Act is as follows:

“92. Subject to subsection (4), a person commits an offence if that person-

 

  • Engages in a transaction that involves criminal property;
  • Conceals, disguises, disposes of or brings into Jamaica any such property; or
  • Converts, transfers or removes any such property from Jamaica.

 

 

POCA defines criminal property in the following way:

“Property is criminal property if it constitutes a person’s benefit from criminal conduct or represents a benefit in which or in part and whether directly or indirectly (and it is immaterial who carried out or benefitted from the conduct)”

Initially, POCA imposed a regulatory superstructure on banks and financial institutions. Eventually, realtors, accountants, and lawyers became Designated Non-Financial Institutions [DNFI] under POCA, with most of the same strict regulatory requirements as banks and other financial institutions. KYC & STR have become a mandatory part of your tools of trade. So today, apart from having the Real Estate Board regulating your profession, you also have the Financial Investigation Division (FID), the Major Organised Crime and Anti-Corruption Agency (MOCA) and the Counter Terrorism and Organised Crime Investigation Branch (CTOC) in the wings waiting to investigate your every act where a breach is suspected.

The solution to this potential regulatory quagmire is simple. Conform! Follow the rules, adhere to the script, seek and obtain advice from those experienced in regulatory affairs and you will be okay.

You are all experienced professionals with moral and integrity compasses fixed to the moral north. If a potential client causes your compass to    gyrate away from magnetic moral north, decline the contract. It will not be worth it in the long run.

Your profession, as with many others which interface with members of the public, is also subject to the Consumer Protection Act and to the regulatory oversight of the Consumer Affairs Commission. By way of example only, I direct your attention to Section 28 of the Consumer Protection Act which is as follows:

“No persons shall, in the course of trade or business, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Any person who contravenes subsection (1) commits an offence and is liable on summary conviction before a Resident Magistrate to a fine not exceeding one million dollars or imprisonment for a term not exceeding one year or to both such fine and imprisonment.”

 

A part of the message that I hope that you all will take away from this talk is that it is an absolute necessity for the growth of your industry and for it to thrive, that your industry is cocooned by a very strong, robust but agile regulatory environment.

The regulatory environment must be robust enough to zealously protect the public interest, and nimble enough to adapt to ever-changing market trends to enable your profession to more efficiently serve both the public and the stakeholders in the real estate market. Anything less will lead to suspicion, scepticism, fear and distrust and will lead inevitably to members of the public, investors and governments, both local and foreign, having no faith in your collective being.

If governments, inclusive of multi-jurisdictional bodies such as the OECD, continue to feel that your industry remains a principal conduit for the proceeds of crimes, for hustlers and other miscreants, your industry will be shackled and draconian reforms will be imposed upon you.

It is my considered opinion that the potential for realtors in the country is awesome. Conveyancing for home purchasers, as currently practised by lawyers in this country, will die. Sooner, rather than later. It is fast disappearing in the UK and is on its way out in Canada. Jamaica will not be immune from these trends.

In a digital online, knowledge empowered world, in these circumstances, realtors have the ability to bring more value to the table for the ordinary home purchaser than lawyers. In these developed countries it is the real estate professional who has filled the gap.

Looked at through this prism, conform or reform has even greater significance, as it will impact the income-earning potential of members of the profession. You all collectively have the power to influence the outcome. It is up to you.

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