We must maintain integrity of property profession
WITH NAMA forced to defend itself on various fronts, the issue of integrity in the property business is in the spotlight. Compared with the controversies in the legal and banking professions, the property profession has come through the meltdown relatively unscathed. But individuals and firms must beware that the possibility of corruption is always there.
I had an early introduction to attempted corruption as a young negotiator in the 1980s. A prospective purchaser had twice viewed a property I was selling and when he summoned me to his office I was not surprised when he made his offer.
What did surprise me was when he placed a large package of banknotes on the desk between us and told me that the £5,000 was mine if I could get the property for him at the price he offered. This would have been easy to achieve as the price he had offered was already at a level I knew my client would accept.
Naturally, I declined the bribe and went back to my office and reported the incident to my boss. Two other cash bribes were offered to me in my 28-year career.
Another corruption that firms need to watch out for is where a client offers to pay part of the fee directly to the negotiator and the negotiator then raises a lower fee. The justification offered for this is that the negotiator deserves more of the fee than his usual commission. Again, I declined this type of offer more than once.
Realistically, one of the reasons there have been few cases of fraud in estate agency is that agents don't tend to hold the large amounts of clients' funds that proved too tempting for several solicitors. That said, I was as gobsmacked as the Property Services Regulator when he confirmed that several auctioneering firms sent him their fees for registration using cheques drawn against their 'client accounts'. Presumably those firms will be the first to be forensically audited.
The great temptress in any business is cash and deposits for new housing schemes are where agents find themselves handling substantial cash and cheques. The Property Regulator's requirement that all showhouse staff who take deposits must be registered is 'heavy handed' but does reduce risk for all involved.
Firms must never allow clients' funds or their provision for VAT to be used to fund the firm's operations. As in all corruption, the first sin is the fatal one as a pattern is established and matters quickly get out of control.
Banks must never accept an e-mailed valuation report from anywhere as there have been several cases of developers "speeding things up" by cutting and pasting an agent's previous valuation report and inserting their own valuation.
As regards NAMA and the problem of several of their staff leaving to join private companies who are buying NAMA assets, I think a "six-month moratorium" before working for such a company is about right. At the speed the investment and loan portfolio markets are moving, six-month-old information is fairly useless and there are strict "confidentiality clauses" in the NAMA employment contracts. Selling all assets by competitive tender also reduces any risk.
I suspect this staffing problem for NAMA will worsen and with great demand for experienced property professionals, it's hard to blame an individual for leaving an organisation with an objective of closing itself down by the end of the decade.
If everyone's objective is to prevent another property bubble then the main weakness in the system is that while the Central Bank requires financial institutions to procure an independent valuation for every house mortgage, this is not required for commercial deals and especially not from an 'independent valuer'.
This means that clients who are paying substantial fees to various departments in a firm can threaten to withdraw that business unless the valuation is produced at the required level.
Firms must be prepared to lose that business. Integrity is everything and your reputation is all that you have.