No real estate licence, no deal

Court voids joint venture agreement with property developer

ANTHONY THARPE, CEO of the Caribbean Real Estate Fund Limited, otherwise known as Careif, has been canvassing for industry support following a loss in the Court of Appeal which means, he says, that property contracts can be voided if a developer is not also licensed as a real estate dealer.

Tharpe had struck a deal to develop land in partnership with property owner Valrine King, but she later opted out of the arrangement.

The developer sued King in the Supreme Court but lost the case in 2017.

In March 2023, the Court of Appeal upheld that ruling in a majority decision. The dissenting judge disagreed with her peers on the question of illegality of the contract between Tharpe and King.

The Real Estate Board of Jamaica, which is responsible for licensing all operators in the sector, declined to comment on the implications of the court case, saying the judgment is available to the public.

However, Dayton Wood, president of the Jamaica Developers Association, said that the case is precedent-setting and the JDA was currently seeking legal opinions on the implications for real estate dealings.

In the case of Caribbean Real Estate Fund v King, Justice Carolyn Tie ruled that a joint venture agreement between Careif and King for the development of lands owned by King was unenforceable on the basis of illegality and uncertainty.

In its appeal, Careif argued that Justice Tie had misinterpreted the provisions of the Real Estate (Dealers and Developers) Act as well as the terms of the joint venture agreement.

Tharpe who represented himself in court argued that the act only mentions salespersons and does not regulate the activities of a real estate developer, and that the court had failed to recognise that Careif had signed the joint venture agreement as a real estate dealer but as a developer.

But following hearing sin February 2021 and March 2023, before Justice Patrick Brooks, Justice Carol Edwards and Justice Marcia Dunbar-Green, the court ruled in a judgement written by Brooks that the “appeal is dismissed (by majority on the issue of illegality); second, the judgment and orders of the learned judge handed down on 12 December 2017 are affirmed; while costs of the appeal to the respondent were to be agreed or taxed.”

Brooks held that Careif had failed to convince the majority on the critical issue of whether the JV agreement was illegal.

“It contemplated Careif carrying out acts, which required it to have had a licence under the act. Careif did not have such a licence. The JV agreement is also uncertain in critical respects. It is inconsistent in its handling of the sums which were payable to Mrs King for her property,” he wrote.

“The JV agreement also allowed for Careif to amend it without stipulating or limiting the nature of the amendments that could be done. Those were critical areas in which certainty was required. The absence of certainty also rendered the JV agreement unenforceable. Based on those findings, Careif’s appeal must be dismissed with costs,” Justice Brooks held.

Edwards, in her dissent, agreed with Brooks’ reasoning regarding the uncertainties in the joint venture agreement and his ultimate conclusion on the outcome of the appeal, but broke

from him in on the issue of the illegality of the contract.

“Whilst it is clear to me that under section 35(1) of the Real Estate (Dealers and Developers) Act, Careif requires a developer’s licence before commencing any development, it is not so clear to me that it required a dealer’s licence before entering into a joint venture agreement, which envisages a real estate development and the sale of real estate once developed,” she reasoned.

“Section 10 of the act provides that a person shall not engage in the practice of real estate business. Strikingly, however, unlike section 35 it does not require a licence ‘before commencing’,” she wrote.

“The language used in Section 10 of ‘shall not engage in the practice’ suggests to me that it is only at the point of engaging in the act of real estate sales and rentals, for instance, (that is real estate dealings) that a licence is required.”

On that basis, she said at the point of entry into the joint venture agreement, no real estate dealer’s licence was required.

“An intention to do something is not in my view, the same as engaging in something,” Justice Edwards said.

Additionally: “A developer does not have to sell the units he develops himself but can contract a licensed dealer to sell on his behalf.”

Tharpe appeared in person and without counsel on behalf of Careif. Alexander Williams, Odeanie Kerr and Sharon Usim of Usim Williams & Co appeared for Valrine King.

In a letter to the Real Estate Board following his loss in court, Tharpe charged that the judgement meant that all agreements entered by a real estate developer, regardless of whether that developer was legally registered with the Real Estate Board, were illegal.

It meant that anyone who acquired a home or property from those real estate developers had also engaged in an illegal activity; that all agreements coming out of relationships real estate developers were illegal and unenforceable, and that it could render mortgage and loan contracts unenforceable “because the original agreements and contracts were illegal,” he wrote.

The Real Estate Board said anyone aggrieved by a court decision had the option of taking their case to Judicial Committee of the Privy Council.

Otherwise: “The Legal Department has no comment upon the decision as the Court’s written reasons are readily accessible by all,” the board said.

But Tharpe says he has no plan to take the case any further. Instead, he wants the issue to drive awareness in government about lawmaking.

“If this i s not appealed by me or my partners, then every Jamaican homeowner who purchased homes from developers can legally stop paying their mortgage loans and the law and government could do anything at all against consumers, because an illegal agreement – which the mortgage and loans are because of this ruling – cannot be enforced legally,” he said.

“The Government and namely the Real Estate Board must take the opportunity to regulate as they should and bring the matter to Parliament to fix this blunder ... Parliament must rewrite the law and that would not make past accounts subject to a new law.”

“In other words, by not appealing, I am giving everyone who bought homes from real estate developers a gigantic financial boost,” he added.