Macau is situated in one of the most economically active and densely populated regions of the world. These factors – along with limits on the space available for construction and the consequent importance of real estate matters – have resulted in a vibrant and active market which has hitherto lacked specific legislation (except for the notary and land register system relating to real estate transaction procedures). The problems with the legal framework are compounded by the fact that many professionals who work in the housing market are insufficiently prepared to work in the sector, thereby hampering the effective dissemination of accurate consumer information and the orderly development of the sector.
In order to address this situation, the government recently requested that a comparative study of the legislation which governs this sector in other countries and regions (eg, Hong Kong, Taiwan and Portugal) be carried out with a view to developing a draft law to be submitted for public consultation.
The study lead to a number of suggestions being made with regard to:
- the classification of professionals;
- the establishment of a licence application system;
- the setting of rules relating to rights and duties of entities engaged in real estate brokering;
- the establishment of monitoring mechanisms; and
- the implementation of a transitional regime.
The draft law divides workers in the sector into two categories – real estate agents and realtors – and sets out requirements relating to each. Article 2 defines a 'real estate agent' as a "commercial entrepreneur, individual or corporation duly accredited with a valid licence for that purpose, dedicated to the business of real estate". A 'realtor' is an "individual, duly accredited with a valid licence for that purpose, who practices real estate business as an employee of the real estate agent or as a director, manager or administrator of the real estate agent [as a] corporation". Both categories of worker enjoy the exclusive right to pursue real estate activities (Article 3(1)). Thus, the draft law distinguishes between real estate agents (which may be either a commercial entrepreneur or a corporation) and realtors – realtors, despite being necessarily integrated in a real estate company or organisation, are also personally subject to an array of rights and duties (see below).
Both real estate agents and realtors are required to obtain a licence – which is non-transferable and valid for three years (Articles 4(3) and (4)) – in order to develop their activity. The granting of a licence is subject to certain requirements; under Article 5(1), a real estate agent must have its registered headquarters in Macau, engage in real estate brokerage, and have at least one manager, director or administrator who has obtained a valid realtor licence. On the other hand, a real estate agent – as a corporation or a business entrepreneur – must not have been declared bankrupt, and its tax obligations must be up to date (Articles 5(1) and (2)).
The draft law also requires realtors to demonstrate that they:
- have completed senior secondary education;
- have passed the relevant qualification examination conducted by the Services Directorate for Labour Affairs (Article 8(1)); and
- are suitable to engage in real estate brokerage, be it individually or as part of a real estate company (Article 5(1)(6), and Article 8(1)(4)).
The draft law recognises several rights which are essential to real estate agents' business (eg, the right to require customers to produce documents and provide necessary information (Article 17(2)). However, the draft law is also constrained by a series of duties, not only regarding clients (Article 18), but also in relation to real estate agents and realtors, to safeguard the transparency of the sector. Thus, real estate agents have a duty to verify the customer's capacity and powers to conclude a deal (thereby ensuring transparency and the provision of accurate and clear information to the client) and to assert the suitability and capacity of their team (Article 18(1)). In addition to other duties prescribed by law, the mediator is also obliged to provide all available and relevant information in order to enable the housing bureau to monitor effectively, communicate changes to their business, oversee the implementation of the bill, or file brokerage contracts for a minimum period of five years (Article 21).
The draft law also stipulates specific duties for realtors, which reflect the concerns relating to transparency and information within the sector (Article 22). Realtors are bound to cooperate with the real estate agent to whom they are subordinate, and are not permitted to transfer clients to other brokers or to divulge information about the underlying contracts. Both the real estate agent and the realtor are subject to a duty of confidentiality regarding facts and information obtained in the course of their business (except where legal exceptions apply). This duty extends to shareholders, directors, managers and administrators of real estate companies (Article 23).
The draft law also establishes a series of information duties to facilitate the housing bureau's task of overseeing the proper implementation of the law (Article 24). To this end, the bureau's officials are vested with certain powers of public authority. Such officials are empowered to access premises which are subject to inspection and to remain on those premises, as well as to request the necessary documents and information. Failure to comply with such directions constitutes the crime of disobedience (Article 25), and the breach of duties under the draft law is an administrative offence (without prejudice to civil and criminal liability, or to other consequences provided by law). Ancillary penalties such as the closure of the establishment or prohibiting real estate activity may be imposed for a period of one month to one year.
To ensure gradual adaptation to the new regime, the draft law provides for the granting of provisional licences which will be valid for three years to be used until the relevant licence provided for in Articles 4 or 7 can be obtained, provided that the applicants meet the requirements of Article 27. If real estate activity is carried out which is similar to that undertaken by a realtor, the individual concerned must have the legal capacity and be suitable (under Article 6) for this purpose. However, if activity is carried out which is similar in nature to that carried out by a real estate agent (whether as a corporation or as a commercial entrepreneur), the individual or entity must possess an establishment and obtain an individual, temporary real estate agent licence (by the commercial entrepreneur, manager, director or administrator, depending on the case under consideration). Such licences will be refused to individuals that have previously been declared bankrupt or insolvent. In both cases, the draft law requires applicants to have fulfilled their tax obligations. The purpose of real estate companies will naturally have to integrate the real estate business.
Parallel to the draft law, a supplementary diploma is also expected to be approved which will specify the rules and procedures for the administration of licensing, for the enforcement of the bill and for real estate activity (among other provisions).
Questions have been raised regarding the implementation of the draft law – the supervision of the information and clarification duties of the actors in the real estate market seems to be problematic according to the very nature of the business. On the other hand, the introduction of suitability and competence requirements for real estate agents is unquestionably a beneficial step, but requires an enforcement effort that is perhaps beyond the capability of housing bureau. By placing too much emphasis on the information duties of the actors in real estate sector, the legislature seems to have overlooked the fact that any real estate agent who lacks the skills required by law is unlikely to draw the bureau's attention to this fact.
The correct application of the draft law will therefore depend on an effective information campaign which emphasises to the general public the greater benefits of accredited professionals, and their importance to a regulated, stable and transparent real estate market. In that way, it is to be hoped that the general public will be able to choose to do business with those professionals who possess the license required by law over those who do not meet the competence and suitability requirements.
For further information on this topic please contact Pedro Cortés or Frederico Rato at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email ([email protected] or [email protected]).