With the recent reduction in mortgage rates, Jamaica has seen a pick-up in its real estate market, with many people now looking to buy or sell properties.

Given the technicalities of the market, many are now opting to engage the services of a real estate dealer and/or salesman to advertise their properties for sale and procure potential purchasers, rather than the taking “For Sale By Owner” route.

With the market being as large as it now is, and with more and more professionals entering the space, it is crucial that property owners looking to sell are aware of their rights. The starting point should be to ensure that the person whose services you are seeking to engage to deal with your property is licensed under the Real Estate (Dealers and Developers) Act (the “Act”).

Under section 10 of the Act, it is an offence for any person to engage in the practice of real estate business without a valid licence from the Real Estate Board.

For the purposes of the Act, a person engages in the practice of real estate business if they do not fall within the exceptions under section 3(2), and on behalf of another person, for compensation or valuable consideration, directly or indirectly paid, or promised or with intent to collect or receive compensation or valuable consideration therefor, they:-

a) appraise, auction, sell, exchange, buy, lease or rent or offer, attempt or agree to do any of the aforementioned things as a broker in relation to any land;

b) advertise or hold out to the public by any oral or printed representation that they are engaged in the business of any of the aforementioned things;

c) manage land or engage in any other business concerned with the management of land either in a consultative capacity or as an agent;

d) take part in the procuring of sellers, purchasers, lessors, lessees, landlords or tenants of land; or

e) direct or assist in the procuring of prospects, or the negotiation or closing of any transaction which results in a sale, exchange, lease or rental of land of another or is calculated to have that result.

After verifying that a real estate professional is validly licensed, an owner looking to sell should then consider what kind of listing arrangement they would like to enter into to sell their property. There are three standard types of listing arrangements; the Multiple Listing Service (MLS) Agreement, the Non-Exclusive Listing Agreement and the Exclusive Listing Agreement.

What are the characteristics and legal effects of these Agreements?

1. Multiple Listing Service (MLS) Agreement:

Before discussing this type of agreement, it is useful to indicate the difference between a real estate dealer and a realtor. A realtor is a real estate dealer who is a member of the Realtor’s Association of Jamaica (RAJ), which is the body responsible for the administration of the MLS in Jamaica. Only members of the RAJ are able to list properties on the MLS.

With that being said, the MLS agreement is an exclusive listing agreement, meaning that for the period of the agreement (which is set out in the agreement, eg one year) the realtor with whom you have listed the property will have the exclusive right to procure the sale of the property.

This means that once the property is sold within the period of the agreement, whether that realtor or another Realtor or even the owner finds the buyer, the owner will be legally bound to pay the realtor the agreed commission on the completion of the sale.

One advantage of this type of listing is that it allows the property to be placed on the Multiple Listing Service (MLS), which is an electronic platform that, if an owner should so authorise, will automatically advertise their property across all the websites of all the real estate companies that subscribe to the MLS.

Another advantage is that the MLS facilitates realtors being able to collaborate to sell properties. A realtor who does not have a listing agreement with the owner of a property can approach the realtor with whom the owner does have the agreement, with a potential buyer, and thereby submit an offer to the owner through that realtor. If such an offer is accepted, the sales commission will be paid to the listing realtor who will then be legally bound to provide the selling realtor who submitted the offer, their share of the commission.

2. Non-Exclusive Listing Agreement:

This type of agreement is, as the name suggests, non-exclusive, meaning that although the property owner has listed their property for sale with a particular real estate dealer, the owner is free to list the property for sale with other real estate dealers; as many dealers as the owner may choose. Under this type of agreement the owner will only be obliged to pay a dealer if that particular dealer procures the sale of the property. Therefore if the owner has the property listed non-exclusively with a number of dealers, they will only be obliged to pay the dealer that successfully sells the property. If none of the dealers are successful in selling the property and the owner procures the sale himself, the owner will not have to pay any sales commission to any of the dealers who had listed the property.

The drawback of this type of listing is that the property will typically only be listed on the websites of those specific dealers with whom they have been listed . The advertising of the property will therefore be left entirely up to those specific dealers. Under this type of listing, dealers can also collaborate to procure the sale of the property by signing a separate agreement between themselves for the sharing of the commission, usually referred to as a Co-broke Agreement.

3. Exclusive Listing Agreement:

This type of listing agreement is somewhat similar to the MLS listing agreement as it is also an exclusive listing agreement. The main difference between this type of listing agreement and the MLS Agreement is that your property will not be placed on the MLS. This type of agreement is also one which will require a Co-Broke Agreement for different dealers to collaborate on the sale of the property. Exclusive Listing Agreements do not have the benefits that come with an MLS Agreement or a Non-Exclusive Listing Agreement, which accounts for why this is possibly the least popular kind of listing Agreement.

Is FSBO ever the way to go?

As mentioned previously, owners may also opt to advertise their property for sale on a “For Sale by Owner” basis. The obvious advantage to this option would be that an owner would not be required to pay any sales commission on the sale of their property. However, the disadvantages that an owner may face include; (i) not knowing how to pre-screen potential purchasers and thereby wasting time, money and effort, (ii) having to interface with potential buyers on their own which may include meeting with them, showing the property to them and negotiating with them directly and (iii) not being aware of the marketing and advertising strategies to be utilizsd to maximise the resale value of their property.

Owning property is a responsibility and liability.

With the great investment of purchasing a property, comes the great responsibility of ensuring that you are aware of your rights and liabilities in relation to the property and as a property owner.

As real estate acquisitions will most often invariably be the largest investment you make in your life, you are encouraged to consult with an attorney-at-law before entering into any real estate agreement, whether it be an agreement listing your property for sale, an Agreement for Sale, or even a mortgage or a lease.

Gabrielle Grant is an Associate at Myers, Fletcher & Gordon, and is a member of the firm’s Property Department. She may be contacted via gabrielle.grant@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.