As in other countries, the sale and purchase of immovable properties in Mauritius is facilitated through real estate agents. However, until recently, the agency sector was wholly unsupervised, which meant that anyone could act or hold themselves out as an agent and consequently be paid a percentage (usually 2%) of the sale price by both the purchaser and the seller upon the execution of a transaction. Often, some agents are paid for a mere introduction of the parties to the transaction as opposed to providing professional services such as advising and negotiating on behalf of the parties. Other issues arising from the absence of regulation of that sector led to suspicious transactions involving money laundering and tax evasion through real estate agents.
Against that background, the Mauritian legislator’s introduction of the Real Estate Agent Authority Act 2020 (the “Act”) is most welcomed not only to protect the interests of buyers and sellers, but also to strengthen the position of professional real estate agents on the market. The Act also aims to respond to some of the concerns raised in relation to Mauritius’ monitoring of suspicious transactions, which led to the country being placed earlier this year on the EU’s list of countries with strategic deficiencies in their regimes for Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) regimes.
The Act will come into operation on a date to be fixed by proclamation. It is likely that the provisions for the establishment of the Authority will become effective first, and then followed by the other provisions of the Act.
The changes brought
(1) The registration and supervision of “real estate agents”
The Act establishes a Real Estate Agent Authority (the “Authority”), whose objectives include the regulation and control of the business activities of real estate agents, the promotion of transparency, accountability and integrity in the real estate sector, and the protection and assistance of any person engaged in real estate transactions with real estate agents.
There is a mandatory requirement for a “real estate agent” to be registered with the Authority. It is interesting to note that the definition of “real estate agent” in the Act is wider than the category of agents who typically introduce, advise and/or negotiate on behalf of parties. It includes a person who, or a partnership in which he is a member which, carries out a real estate transaction by:
– negotiating the sale, exchange, purchase or lease of real estate;
– directing or assisting in the procuring of prospects, or the negotiation or closing of transactions which result in the sale, exchange, purchase or lease of real estate;
– taking part in the procuring of vendors, purchasers, lessors, lessees, landlords or tenants of real estate;
– engaging in real estate management, either as a consultant or as an agent;
– advertising or holding himself out as being engaged in the business of negotiating the sale, exchange, purchase or lease of real estate; and
– receiving payment for a real estate transaction, either by himself, his partner, his employee or his agent.
In particular, land promoters and property developers are included in that definition, except to the extent that they own the whole or part of the real estate.
Among the other categories excluded from the definition of “real estate agent” are insolvency practitioners who carry out a real estate transaction in the discharge of their functions.
Any person who falls under the definition of “real estate agent” must be registered as such with the Authority. The criteria of eligibility for such registration in respect of an individual are:
– minimum age of 21 years; and
– holder of diploma in real estate or such other equivalent as the Board of the Authority may approve; or
– minimum of 5 years’ experience in the business of real estate transactions.
In case of a company carrying out the activity of a real estate agent, at least one of its directors must be registered as a real estate agent under the Act.
The real estate agent must furnish security to the Authority in the form of a cash deposit, bond from a bank, policy insurance or mortgage on immovable property.
(2) Requirement for a written contract of agency
The Act requires a real estate agent to enter into a written contract with their client before carrying out any real estate transaction on their behalf. That contract must specifically provide the following:
– the real estate subject of the transaction;
– the transaction to be carried out;
– validity period of the contract;
– whether the agent has an exclusivity for that transaction.
In addition, the contract may provide that any dispute pertaining to its performance will be referred to and settled by the Authority. At this stage, parties need to consider whether this would be an appropriate method of dispute resolution, given the absence of substantive information regarding the jurisdiction of the Authority to determine those disputes and the procedure that it will apply. For example, it is unclear for now whether the Authority is given the power to settle a dispute by delivering a ruling or an award that is final and binding on the parties, as opposed to providing conciliation and/or mediation facilities with a view to an amicable settlement between the parties.
(3) Agency fees
The Mauritian legislator went even further than what is provided in other jurisdictions insofar as the Authority will fix the fees that a real estate agent charges to its clients. That fee will be prescribed as a percentage of the value of the transaction.
Real estate agents will nonetheless be allowed to charge additional fees for advice given in respect of a real estate transaction or other services not specified in the Act.
(3) Monitoring and reporting obligations
Real estate agents will be required to keep accounts of all their receipts and expenditure in relation to transactions, showing clearly and separately any amount received from, or on behalf of, their clients or any amount paid to their clients or to any other person. Those accounts must be maintained for a period of 7 years following the completion of a transaction.
For the purposes of AML/CFT, real estate agents will fall under the supervision of the Financial Intelligence Unit (FIU). They will have the obligation to report any suspicious transaction to the FIU as soon as they become aware of it and not later than 5 working days of their suspicion. The failure to comply with that reporting obligation will constitute an offence, for which the real estate agent may be liable to a fine not exceeding Rs 1 million and imprisonment for a term not exceeding 5 years.
How will these changes affect the real estate sector?
The agency fee that the Authority will fix may have a direct impact on the affordability of a real estate transaction, although there is no visibility for now on the proposed percentage fee and to what extent it will be different from what agents generally charge as a matter of practice.
The criteria of eligibility for a person to become a real estate agent and the requirement for a written contract of agency are factors that are also likely to enhance the accountability of agents vis-à-vis their clients.