Mark Titus, Gleaner Writer
THE REAL Estate Board and Strata Commission are on a mission to have the law governing the use of purchasers' deposits amended as a way of ensuring that home investors enjoy greater protection.
"Cabinet has approved the amendment and we have completed three drafts of the bill; the fourth is being worked on as we speak," said Sandra Watson, the board's chief executive officer. "It has to be approved by Cabinet before we can provide any other details."
"Primarily, it will ensure that developers are more accountable, especially regarding depositors' deposits," noted Watson.
The issue of inadequate investor protection came to national attention recently after the Real Estate Board and several home investors expressed concerns about the millions of dollars collected by the developers of the stalled Palmyra Resort and Spa scheme in Montego Bay, St James.
Ken Tomlinson, the receiver appointed by creditors to recover more than US$110 million invested in the Palmyra project, reportedly found no evidence of the legally required trust fund, which should have been established to deposit the more than US$2.4 million collected by the developers from purchasers.
However, Robert Trotta, the lead project developer for the project, has dismissed the claims, saying everything is above board with the project.
However, the board has taken the matter to court, seeking to protect purchasers' deposits under prepayment contracts either by way of a refund, or if the scheme is going ahead, to ensure that contracts are completed.
"We had a problem getting information from the developer, that is why we are in court now," Watson told The Gleaner.
In response to the Real Estate Board and Strata Commission allegation, Trotta made no mention of the trust fund but stated that, while under his control, the accounts of The Palmyra were audited by two internationally acclaimed audit firms.
By regulation, a developer can only be registered after the board does a check on the candidate to ensure he or she is not bankrupt and has a good financial record.
Additionally, where a down payment from the purchaser is required to finance construction, Watson said the developer has to register a charge with the board, which means the property cannot be sold without its approval, as according to Section 31 of the Real Estate Board Act, the developer must place all of the deposit in a trust account at an authorised financial institution.
The developer may use up to 90 per cent of the deposit, but this has to be backed by certification - that is, the work to be done on the ground must be verified as having the same value as the monies spent.
"Had the developers lodged the charge, it would have made the task of protecting depositors' deposits easier," said Watson, in regards to the Palmyra issue.
"What is of great concern to us is the failure of purchasers to come forward with information. That is important if they are to be protected."