Self-regulation isn’t enough

Source : Today - 16 Feb 2009

Stricter rules are needed to protect the public from unscrupulous real estate agents

THE recent case of the couple, who sued ERA Realty Network after discovering they had been shortchanged by the company’s agents when they sold their apartment, once again highlights the need for better regulatory control of real estate agents.

Following the case, there were many calls for the authorities to bring about measures to clamp down on unscrupulous agents. I, too, had made such a point sometime last year, but the calls have apparently all fallen on deaf ears.

Perhaps the authorities are more concerned with combating the current economic downturn and, with the property market at present in a slump, the need for such action may be felt to be less urgent.

In 2007 alone, there were more than 1,000 complaints to the Consumers’ Association of Singapore about disputes between property agents and their complainants, a majority of which were about unsatisfactory service.

In the case of the couple - Mr Yuen Chow Hin and his wife Madam Wong Fai Fan - they sued ERA and not the agent himself, who may not have had the resources to repay them. Their apartment had been sold to the wife of their property agent’s boss, who almost immediately flipped the flat for $257,000 more than the $688,000 that she had paid for it.

As the learned judge pointed out, not only was this unethical, it was also a breach of contract as there was a conflict of interest between the clients and the agent.

Perhaps the authorities should have another look at the matter to ascertain if a crime had indeed been committed.

Justice Choo Han Teck also noted: “This kind of misconduct is never easy to discover because it is carried out in stealth and in breach of trust; and far too many homeowners and potential purchasers are at risk.”

This is precisely why there should be better rules in regulating the thousands of property agents out there.

A property is perhaps the largest purchase made by most individuals. The sums involved are huge and agents make anything from 1 to 3 per cent of the transaction amount. So, there is no need to act dishonestly. Yet, many do.

It is therefore in the interest of the honest majority that there be rules for all to act in an ethical manner.

Currently, there is nothing in the rules to prevent dishonest agents, even after several convictions, from repeating their actions on unsuspecting clients. There are said to be several self-regulatory bodies dealing with agents, including the Institute of Estate Agents (IEA), but these lack teeth, and therefore few see the need to comply with their rules.

The only action taken by the authorities recently was the Competition Commission’s decision to have the IEA remove its commission guidelines for its agents.

Several property agencies, like Dennis Wee Properties and PropNex, have their own internal rules and guidelines to keep their agents in check, but at the very worst, all they can do is to file reports with the police and the Inland Revenue Authority of Singapore against misconduct by unscrupulous members.

Most agents do not even carry professional indemnity insurance to protect clients from any financial loss. Even bankrupts, from whom clients have little recourse too in case of financial misconduct, can be real estate agents.

It’s time therefore for the authorities to bring into line an industry which is involved in billions in transactions. Self-regulation is not enough nor satisfactory.