Singapore government to regulate real estate industry

The Ministry of National Development (MND) has proposed ways to regulate the local real estate industry and is seeking public feedback on it.

According to MND, there are about 1,700 real estate agencies licensed by the Inland Revenue Authority of Singapore (IRAS) and an estimated 25,000 to 30,000 real estate agents in the market. Recent rising number of complaints against real estate agents was deemed as ‘not tenable’ and that the whole system was not ‘satisfactory’ by minister of National Development, Mr Mah Bow Tan.

In 2008 alone, there were more than 1,400 complaints.

The proposed regulatory framework aims to enable consumers to safeguard their interests through public education and tough regulations, and also to increase professionalism of the real estate industry. To start off, residential property transactions will be focused upon.

There are three major components to the proposed regulations and they are:

i.                    Government enhanced regulatory powers

The regulatory authority will work with a recognised accreditation body for agents that will be formed. A public central registry will be maintained by the accreditation body to allow agencies and consumers to ascertain the background and profile of agents they wish to engage.

MND has also proposed to disallow real estate agents from working as freelancers by only allowing them to represent one accredited agency. There will be a standard associate agreement between agents contracted to an accredited agency for them to practice. Furthermore, agents must pass an industry examination and be accredited by the accreditation body before they can practice. Agents will also be disallowed from representing both buyer and seller in the same transaction to prevent conflict of interest.

The regulatory authority will also be given enhanced regulatory powers to increase levels of monitoring and enforcement. Agents and/or agencies that are caught for non-compliance with legislative requirements or infringement of accreditation requirements will face disciplinary actions through a tiered penalty system that may include warnings, fines, suspension and expulsion. Agencies with errant agents may also be subject to restriction on recruiting agents.

ii.                  Industry-led accreditation

A mandatory industry-led accreditation scheme for both agencies and agents is expected to encourage greater professionalism among them.

Agencies will have to adopt minimum service standards that will be made known to clients upfront, and provide compulsory continuous professional training and upgrading of their agents. Meanwhile, agents will have to be qualified through an industry entrance examination covering both ethics and practical knowledge before they can practice as well as adhere to a code of conduct.

To protect consumer interests, the accreditation body will maintain a public central registry listing all accredited agents so that consumers can see if the agent they engage is qualified. Agencies will also benefit from this as they could possibly find the background and profile of agents they wish to hire. A standard contract between agents and agencies spelling the rights and obligations of agents before any service is rendered will also be adopted. This move is aimed to reduce common disputes like commission rates, and co-broking agreements.

MND has also proposed that agencies put in place complaints-handling processes including a mediation platform at the agency level in the event of a dispute. Additionally agents could be made to have professional indemnity insurance to cover any negligent acts or omissions or breaches of professional duty.

iii.                Improved Dispute Resolution Mechanism

One of the key drive to this regulatory proposal is due to the high number of complaints received in recent years. It is expected that agencies should take on greater responsibility for resolving disputes with clients and to facilitate this, proper complaints handling processes within the firm should be set up.

The government is also exploring on the possibility on working with industry players to set up an independent tribunal to specialise in real estate disputes.

MND’s proposed framework for the real estate industry is currently under the public consultation process and members of the public can share their views on www.mnd.gov.sg. Key elements of the new framework are expected to be announced in the December 2009 to January 2010 timeframe while legislative enactments are expected by the second half of 2010.