Ghana Real Estate License Act, 2012 Presentation Michael B. Gorham, - - PDF document

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Ghana Real Estate License Act, 2012

Presentation Michael B. Gorham, Consultant Overview

Licensing Should Benefit the Public The Purpose of any real estate broker licensing act should be to protect the public interest. This is accomplished by requiring those wishing to practice as a professional be competent and honest. Future changes The Act will obviously change over time. As implementation proceeds, real estate practices will alter in order to both comply with and avoid compliance. Furthermore, as enforcement occurs, case law will result in further adjustments. Particularly, issues dealing with laundering of illegal income and tax evasion will result in learning experiences likely requiring modifications to the

• Act. Fortunately the Act is structured in such a way that modification from time to time can

easily be accommodated. United States Model In the United States, every state has laws requiring a license to engage in real estate brokerage. The primary purpose is to protect the public interest by preventing incompetent and unqualified persons from engaging in activities which can cause substantial harm to the public. The authority is most often referred to as a board or commission. The Board The Association of Real Estate License Law Officials (ARFELO) compiles statistics from all of its member jurisdictions. ARELLO statistics show the large majority of boards/commissions are comprised of between 5-9 members. Similar to other professional licensing bodies (ie, appraisers, surveyors, doctors), in nearly all cases, the regulated industry makes up the majority

• f a board’s membership. Most jurisdictions have 1 or 2 appointed public members, who cannot

be licensed brokers or salespersons. The case for having a majority of the Board come from the licensed profession itself is two-fold: (1) persons with strong knowledge, education and experience backgrounds are desirable in order to deal with the multitude of issues facing the regulated industry, and (2) a regulated industry should be able to operate independently, free from undue influence from other groups.

Implementing the Act

The critical elements in implementing this law, as is the case with most new licensing acts are that: Administration is objective and unbiased thereby treating all practitioners alike; and

2 Administration is executed with sufficient speed so that markets and practitioners are not unnecessarily burdened by unreasonable delays.

Elements of a Successful Licensing Program

The proposed Act contains a number of necessary and ambitious undertakings before licensing becomes a reality. I have divided my comments into three categories: (1) Timing, (2) Program Administration and (3) Funding. An excellent resource for information, models and practices is the Association of Real Estate License Law Officials (ARELLO). ARELLO is comprised of licensing authorities from the United States, Canada, Africa, Central and South America, Europe and Asia. It is the recognized authority on broker regulation. I would suggest contacting ARELLO to inquire about membership and resources. The website is: www.arello.org Timing It is important the Authority give itself sufficient time to develop and put in place a licensing program which encompasses rules/regulations Board appointment, staffing, education, testing, application review, enforcement, hearings and communication. As an example, when real estate appraisers were first licensed in my state of Colorado in 1990, it took a full year to put the program into effect, even with most staffing and application procedures already in place. Program Administration The draft bill requires the Authority to regulate the practice of real estate brokerage (Article 4) and to propose regulations to the Minister (Article 50). Regulations should be enacted in the areas of education, testing, applications, enforcement/conduct, and communication. An important consideration for the Authority is whether to establish and implement programs for education, testing and license application within the proposed governmental structure or whether to outsource some or all of these functions to private or educational entities. Handling all of these functions “in-house” may allow for greater control by the Authority. However, outsourcing may have advantages related to funding and staffing (discussed later).

Education

Section 4(b) gives the Authority power to “prescribe or approve courses for real estate brokerage and conduct….” Section 4(h) gives the Authority power to “facilitate and promote education which is necessary for the development and growth of real estate brokerage practice.” Recommendations: Determine who will provide the educational course. Courses are often offered through universities, trade associations or private government-approved organizations. Real estate associations could serve as an excellent provider.

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• 1. Develop the course by using generally accepted academic standards (consult with

ARELLO and local education experts).

• 2. Have the pre-licensing course reflect subject matter areas relevant to actual practice,

rather than purely academic studies.

• 3. Determine how and where the courses will be offered. Will the environment be a

traditional classroom setting or will it be by distance learning (where instructor and learner are separated by distance or time).

• 4. Course completion must be certified to the Authority, either manually or electronically

through data uploads.

Testing

Section 4 (b) authorizes the Authority to “… set standards for qualifying examinations for registration as a real estate agent or broker.” Section 21authorizes the Board to issue a license to a person who “has passed a qualifying examination conducted by (i) the Board or, (ii) an independent testing service designated by the Board.” Recommendations:

• 1. Tests should be impartial, accurate and valid.
• 2. Tests should be developed and maintained in conformance with generally accepted

psychometric standards and methods (consult with ARELLO and local testing experts).

• 3. Tests should be developed by the Authority, universities or businesses that specialize in

exam development and administration.

• 4. Tests should initially be reviewed and accredited by an independent and recognized

accreditation authority.

• 5. The content upon which the test questions are derived should come from actual practice
• f real estate activity.
• 6. It is preferable for tests to be offered and administered electronically, either by a pre-

programmed data devise that contains test questions and stores candidate responses to a removable storage device or by a computer-based and Internet-based format. This allows for secure, effective uploads of candidate information and test scores directly to the government database.

Enforcement/Conduct

Purpose: To assure a process for investigation and taking action on complaints involving wrongful conduct by persons holding real salesperson’s and broker’s licenses. In addition, to set forth the grounds for any action to be taken. Finally, to provide a hearing process for licensees accused of wrongdoing.

4 Sections 29(2) and (3) allow for complaints from the public and require the Authority to refer a complaint for hearing. Sections 28 and 45 enumerate grounds for disciplinary action and wrongful conduct. Sections 28 and 32 provide for types of sanctions the Authority can impose. Sections 28(6), 29, 30, 31 and 32 provide for hearing and appeal procedures and give the Authority the right to take disciplinary action against a licensee for violations of the Act. Suggested language:

• A. “The Authority, upon its own motion, may, and, upon the complaint in writing of any

person, shall, investigate the activities of any individual or organization which holds a license or any person who assumes to act in such capacity. If it is shown that probable cause exists that a violation of the Act has occurred, the Authority, after the holding of a hearing may impose an administrative fine not to exceed (insert amount) for each separate

• ffense and to censure a licensee, to place the licensee on probation and to set the terms of

probation, or to temporarily suspend or permanently revoke a license when the licensee is found guilty of:

• B. (list violations in draft Act 28(5) (b))

Communication/ Outreach

Purpose: To insure official communication as to implementation and interpretation of the Real Estate Agency Act. Recommendation “The Authority shall set up a constant information system on the Real Estate Agency Act and the real estate market, including providing accurate and up-to-date information to individuals and organizations who hold licenses and to the public, in general. The Authority may consider all available means and methods for providing communication and

• utreach. The Authority shall coordinate, as needed, with other Ministries and ministerial-

level agencies.” Funding Section 16 provides that funding of the Authority shall include (1) moneys approved by Parliament (2) money from fees charged by the Authority in the performance of its functions and (3) donations, grants and other moneys approved by the Minister for Finance.  Parliament (General Funding v Cash Funding In many jurisdictions, especially the United States and Canada, funding for real estate broker regulation comes from the government, licensee fees or a combination of the two. Government funding is often referred to as “general funding,” meaning funding is part of the overall cost of government and paid for by all citizens. If an agency is general funded,

5 its budget is submitted yearly, approved by the government (Parliament) and becomes a line item in the overall budget. Funding solely from licensee fees is often referred to as “cash funding.” In many cases a cash funded agency has greater authority to determine how its budget is allocated and has fewer restrictions, since the funding is derived solely from fees assessed to licensees by the agency (Authority) and, at least in theory, advances the interests of the agency. As mentioned in my comment on the Act, Section23(3)(f), license renewal fees can be collected in advance for future years. Thus, revenue derived will earn interest to support agency needs in future years. This demands the Authority carefully project its future needs at the time

• f renewal.

 Donations, grants and other moneys Donations, grants and other moneys can be a lucrative source of funds to support Authority needs. In the US, states such as Georgia and Hawaii have established relationships with educational foundations which provide money for a variety of real estate programs that directly benefit licensees and the public. ARELLO is a good source

• f information on such programs.

 Administrative Fines An earlier recommendation proposed that the Authority be given the power to levy administrative fines for violations of the Act. Fines have been shown to work in other jurisdictions as a deterrent, especially for less serious conduct and where the public interest may be better served by imposing fines along with additional education, restitution or probation. Fines would be deposited to the Authority’s operating account or be placed in a separate account for special purposes.  Outsourcing A key consideration is whether to outsource administrative functions to private

• rganizations or perhaps develop public/private partnerships. Regulatory components

such as education, testing, routine background checks and completing applications are all possible and are utilized by a number of US and Canadian jurisdictions. Under these agreements, service vendors takes on the responsibility of developing the education program, test, etc., with the applicant paying a fee directly to the servicer. This would relieve the Authority from the need to develop the particular component internally, with its attendant personnel and other costs. Of course, the Authority, through key personnel should retain control and approval of such programs.

Conclusion

The proposed Ghana Real Estate License Act is an excellent draft, which should provide the framework for sound regulation of real estate salespersons and brokers. It is obvious that significant effort has been made to create a framework for addressing the broad issues which face Ghana in its efforts to oversee a growing real estate industry. Hopefully, the suggestions and comments provided will help to further a final draft for consideration by Ghana’s Parliament.

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Data Aggregation (Multiple Listing Service)

The draft real estate bill mentions in Section 37 (4) and (5) the creation and maintenance of a national data base. Additional information on how this system is set up should be discussed separately, probably when regulations are being drafted.

Separate from a government licensing program and a national data base, real estate must be successfully marketed. A vital considerations is developing a system for data aggregation. Data aggregation is any process in which information is gathered and expressed in a summary form. In real estate, a common aggregation purpose is to acquire information about a particular property based on specific variables such as price, terms and description. The information can then be used to advertise in a manner likely to appeal to an individual for which data has been

• collected. Data aggregation allows brokers to efficiently market a seller’s/landlord’s property.

Conversely, buyers/ tenants and their representatives can easily determine which properties are available for purchase/lease. In the United States, the National Association of Realtors (NAR), as well as state and local Realtor Associations, have developed an efficient information and cooperation system referred to as the Multiple Listing Services (MLS). This is a private offer of cooperation and compensation by listing brokers to other real estate brokers. Today, through more than 800 MLSs, brokers share information on properties they have listed and invite other brokers to cooperate in their sale in exchange for compensation if they produce the buyer. Sellers benefit by increased exposure to their property. Buyers benefit because they can obtain information about all MLS-listed properties while working with only one broker. . MLSs are a powerful force for competition. They level the playing field so that the smallest brokerage in town can compete with the biggest multi-state firm. Buyers and sellers can work with the professional of their choice, confident that they have access to the largest pool of properties for sale in the marketplace. Real estate information on the Internet is readily available. Consumers can access and view all publicly available listing information on the Web site of their broker of choice. MLSs are private databases that are created, maintained and paid for by real estate professionals to help their clients buy and sell property. In most cases, access to information from MLS listings is provided to the public free-of-charge by participating brokers. Data that is not publicly accessible includes information that would endanger sellers' privacy or safety, such as seller contact information and times the home is vacant for showings” National Association of Realtors, Multiple Listing Service MLS): What is it? www.realtor.org