The Council for Estate Agencies has taken Square Yards Singapore Pte Ltd to task for failing to provide a written advisory message to an investor to draw his attention to the risks involved in purchasing foreign properties.
Besides slapping a financial penalty of S$7,500 on the two-person agency, CEA has – for the first time concerning foreign properties – imposed a condition to Square Yards’ licence that it is not to market or transact in any foreign property for six months with effect from March 1, 2017.
The previous time a licence condition was imposed was last year, when HSR International Realtors was banned from undertaking any collective sale work for one year from April 220, 2016.
In the case of Square Yards, the investor had bought a property in North Dakota in the United States for US$74,950 through the agency. He made partial payment of US$33,982.50 to the US developer in 2014 and was not able to recover the sum after the developer was charged for alleged fraudulent activities.
Square Yards was charged for breaching the Practice Guidelines for Estate Agents and Salespersons Marketing Foreign Properties (PGMFP) and the Code of Ethics and Professional Client Care (CEPCC) under the Estate Agents Act.
In early August 2014, Square Yards and US developer North Dakota Developments LLC conducted a seminar in Singapore to promote and sell the Transhudson Hotel, Parshall Project, located in North Dakota. The US developer also introduced its other project – the Great American Lodge, Montana Project – to prospective investors at the seminar.
After the seminar, the investor bought a unit at the Transhudson Project through Square Yards at a purchase price of US$74,950. He paid a total of US$33,982.50 to North Dakota Developments LLC in mid-September 2014, which included the booking fee, closing fee, and balance of the first stage payment. Square Yards subsequently received about US$3,900 as commission for this transaction.
“Throughout the transaction process, Wai Yin Peng Shermaine, key executive officer of Square Yards, and her property agents did not provide the investor with a written advisory stating that he must conduct due diligence,” the CEA said.
“They did not highlight to the investor the risks that are involved for foreign property consumers and that the transaction is subject to foreign laws, and to any change in policies and rules in the US.”
Investigations also revealed that Square Yards had facilitated the sale of two other units – one investor had purchased a unit at the Transhudson Project, and another investor at the Montana Project. The three investors paid a total of US$112,279.50 to North Dakota Developments LLC.
But around May 5, 2015, the US Securities and Exchange Commission charged North Dakota Developments LLC for allegedly raising over US$62 million fraudulently from investors worldwide through the sale of interests in the development of housing projects based in the US, including the Transhudson and Montana Projects.
These three investors have not recovered the amounts they have paid to North Dakota Developments LLC.
Under the PGMFP, however, estate agents appointed by the developer “shall provide a written advisory message to the consumers that they must conduct due diligence, drawing their attention that risks are involved for foreign property consumers and that the transaction is subject to foreign laws, and to any changes in policies and rules in the country where the property is located”.
Estate agents and salespersons must also perform their work in accordance with applicable laws and must not perform estate agency work that they are engaged to perform unless they have the relevant knowledge to do so, including having to be fully conversant and compliant with the Estate Agents Act and the policies, practice circulars and guidelines of the CEA.
Adapted from: The Business Times, 20 January 2017