EMV 4262: REAL ESTATE BUSINESS ETHICS

Lecturer: George TWAGIRA

MSc Real Estate and Property Management
BSc Land Economics
MIRPV
Mobile No. 0784524545
gtwagira@gmail.com/g.twagira@ur.ac.rw
Chapter One: INTRODUCTION
1.1 KEY Definitions (Differentiate between the following)
• A professional and Professionalism: A professional is a person who belongs to a
particular profession whereas, Professionalism refers to the status, methods,
character or standards expected of a professional or professional organization
such as reliability, discretion, and fair play.
• Profession and Career: Profession is a type of economic activity which a person
undertakes only if he/she has the required knowledge, skills and has undergone
training for a specified period whereas Career refers to all the roles which a
person takes on during his lifespan such as education, training jobs, work profiles,
work experience. It is the journey of learning and work, the so called life pattern
of a person.
• Morality is concerned with the norms, values, and beliefs embedded in social
processes which define right and wrong for an individual or a community
whereas, Ethics is concerned with the study of morality and the application of
reason to Adhere to specific rules and principles that determine right and wrong
for a given situation.
• Professional Ethics refers to the specific rules and principles that a person must
adhere to in respect of their interactions and business dealings in their
professional life whereas, Business ethics is the study of business situations,
activities, and decisions where issues of morally right and morally wrong are
addressed.
 Global Fundamental Ethical Principles as per RICS and IVS
There are six standards and fundamental ethical principles that all real estate
surveyors /Valuers must be able to demonstrate and adhere to:
• Integrity: This means being honest and straightforward in professional and
business relationships (in all that you do).
This standard include but not limited to the following behaviours or actions:
• Being trustworthy in all that you do.
• Being open and transparent in the way you work. Sharing appropriate and
necessary information with your clients and /or others to conduct business and
doing so in a way so they can understand that information.
• Not taking advantage of a client, a colleague, a third party or anyone to whom you
owe a duty of care
• Acting consistently in the public interest when it comes to making decisions or
providing advice.
• Be transparent about fees and any other costs or payments such as referral fees or
commissions
• Communicate with your client in a way that will allow them to make informed
decisions.
• If you use the services of others then ensure that you pay for those services within
the timescale agreed.
• Encourage your firm or organization you work for to put the fair treatment of
clients at the centre of its business culture.
• Objectivity: not to allow conflict of interest or bias or undue influence of others
to override professional or business judgements and obligations.
• Making clear to all interested parties where a conflict of interest, or even a
potential conflict of interest, arises between you or your employer and your
client.
• Not offering or accepting gifts, hospitality or services, which might suggest an
improper obligation.
• Competence. Acting within your scope of competence through maintaining
professional knowledge and skills required to ensure that a client or employer
receives a service that is based on the current developments in practice,
legislation and professional techniques.
• If it appears that services are required outside that scope then be prepared to
do something about it, or for example make it known to your client, obtain
expert input or consultation, or if it is the case that you are unable to meet the
service requirements, explain that you are not best placed to act for the client
and decline the assignment.
• Always provide a high standard of service: This means always ensuring that your
client, or others to whom you have professionally responsibility, receive the best
possible advice, support or performance of the terms of engagement you have
agreed.
• Be clear about what service your client wants and the service you are providing.
• Confidentiality. Respecting confidential information of your clients and potential
clients acquired as a result of professional and business relationships and not to
disclose such information to third parties unless it is appropriate to do so, nor to use
the information for personal advantage of the real estate surveyor or third parties.
• Promoting trust in the profession and Professional Behaviour: This means acting in a
manner, both in your professional life and private life, to promote you, your firm or
organization you work for and the profession in a professional and positive way.
• This standard includes, but is not limited to the following behaviours or actions:
• to act diligently and to produce work in a timely manner in accordance with applicable
legal requirements, technical and professional standards. To always act in the public
interest and to avoid any action that discredits the profession
• Promoting what you and the profession stand for-the highest standards globally
• Understanding that being a professional is more than just about how you behave at
work; it is also, about how you behave in your private life.
• Understanding how your actions affect others and the environment and if appropriate
questioning or amending that behaviour
• Always trying to meet the spirit of your professional standards and not just the letter of
the standards
• Treat others with respect: This means treating people with courtesy, politeness, and
consideration, no matter their race, religion, size, age, country of origin, gender, sexual
orientation, disability or social class. It is also being aware of cultural sensitivities and
business practices.
• Always being courteous, polite and considerate to clients, potential clients and
everyone else you come into contact with.
• Never discriminate against anyone for whatever reason. Always ensure that issues of
race, gender, sexual orientation, age, size, religion, country of origin, disability or
social class have no place in the way you deal with other people or do business
• As much as you are able, encourage the firm or organization you work for to put the
fair and respectful treatment of clients at the centre of its business culture

• Take responsibility: This means being accountable for all your actions- don’t blame
others if things go wrong, and if you suspect something isn't right be prepared to do
something
• This standard includes, but is not limited to the following behaviours or actions:
• Always act with skill, care and diligence
• If someone makes a complaint about something that you have done, then respond in
an appropriate and professional manner and aim to resolve the matter to the
satisfaction of the complainant as far as you can
• If you think something is not right, being able to question it and raise the matter as
appropriate with your colleagues, with your firm, or professional body
 Importance of A good Ethical Conduct, Ethics Vs Law
• A good Ethical Conduct adds the value to your reputation and helps build
ongoing personal and business success. What are negative effects of
Unethical Conduct/behaviour to a professional Real Estate Surveyor?
Ethics Vs Law
• Ethical conduct is doing more than what the law requires you to do that is the
willingness to go beyond what is mandated by law. This includes not taking
advantage of vulnerable people, and loopholes in the law while providing the
professional service
• Certainly you are bound by law in many ways, but not every situation is covered
by the law and legal consequences and you are not supposed to take ethical
choice because it makes good business sense but you should do so as long as it
is about what you believe is right or wrong and taking pride in what you do.
Group Assignment 15 Marks
By Refering to the Fundamental Ethical principles, Discuss at least 5 scenarios of un ethical behaviours of;
(i) a Valuer (ii) Property Manager (iii) Estate Agent (iv) Development Surveyor
 Professional Practice
• Professional practice can therefore be viewed as a systematic way of performing
duties of a professional nature so as to:

1) Ensure uniformity in approaches to job execution - a particularly important

consideration in an office where there is more than one professional.
2) Be able to produce a professionally acceptable end-product.
3) Ensure conformity to professional ethics and standards.
• Therefore, the professional practice is a detailed consideration of the most effective
and efficient procedure of discharging (satisfying) the services of one’s profession.
Features of a Professional
• A true professional distinguishes himself/herself in his/her thinking, speaking and
appearance as detailed below:
Thinking: A true professional always has a positive attitude and expects to win. A true
professional is always goal oriented, single minded yet broad minded and above all is polite
and considerate (understanding, attentive, kind).
Speaking: A true professional speaks with authority (power), sincerity (seriousness) and
enthusiasm (interest, passion). He/she thinks before he speaks and speaks good
language he/she is using. When speaking over the phone, always prepare yourself
before you speak. Do not hold on if the phone is engaged, hang up and ring later. Try to
‘sound great’ over the phone. Be positive, cheerful (happy, joyful) and helpful. Never
argue (debate, discuss, dispute, claim) over the phone.
Appearance: A client often, yet perhaps mistakenly, judges the standing of a
professional by the way he/she dresses. First impressions do count. A professional
must always look tidy (organized) and smart. Even if you need to dress casually, dress
casually yet be smart.
 Achieving Professionalism
• Exhibit the characteristics of a profession.
• Participate in a unified professional membership. A professional will pay dues out
of their own pocket to organizations for the privilege of being a practicing
professional and A professional organization is the cooperative agency through
which the profession is advanced.
• Identify and eliminate anti-professional developments. Political activism and
increased visibility as
professionals will be required to create and
sustain positive professional advancement.

Difference Between Code of Ethics and Code of Conduct

• Code of Ethics sets out fundamental principles and provides a general guidance
in terms of ethical and moral responsibility
• A code of ethics as compared to a code of conduct will tend to:
Be more general
Contain fewer principles
Be expressed in terms of 'ought' (and not 'must')
Be directed to all people affected (not just to employees)
Provide general guidance in those cases where a code of conduct is silent,
ambiguous or unclear.
• Whereas,
• Code of Conduct clearly outlines the expected standards of behaviour but it is
consistent with the Code of Ethics. it is a set of rules outlining the responsibilities of;
or the proper practices for an individual, party or organization
 Typically Codes talk about expectations to:
obey the law,
conflicts of interest,
insider trading,
preserving confidential information,
Bribery/corruption,
corporate opportunities,
competition and fair dealing among other things
Professional Bodies
• Professional Body: An institution found by a group of people who share a certain
common interest for which they are to adhere to a code or set of standards and rules
of conduct. The body highlights the: Procedures, Dos and Don’t's, Ethics, etc.
Essential Features of a Professional Body
• Essential Social Function
• Specialized Body of Knowledge
• Requirements for Admission
• Self-regulated
• Adaptability
A Professional body is usually composed of the General Assembly (members), Board
of Directors or Management Council or Registration Board/Council as well as the
Secretariat
 Professional Bodies and their functions
Professional Bodies are:
• charged with overseeing matters pertaining to the profession and safeguarding
the interests of the profession,
• Responsible for policing ethics and standards of the profession
For more examples to Valuation Law 2010 for Roles of IRPV/Board of
Directors
Registration Board:
• Usually established by law and manned by professionals
• Responsible for registration of practitioners
• Also control professional practice to ensure public protection
Other key functions
• defining specialist professional competence thresholds
• providing and promoting professional development
• issuing mandatory practice statements, advisory guidance and information
promoting the specialisation to clients and the public
For more examples to Valuation Law 2010 for Roles of Regulatory
Council of IRPV
Professional Liability and Professional Indemnity Cover (Policy)
Professional liability: is the legal obligations arising out of a professional’s errors,
negligent acts, or omissions during the course of the practice of his or her profession.
In other words, professional liability refers to legal consequences due to the
negligence on the part of a professional.

Litigation against valuers seems to fall into two main themes i.e.,
that which relates to human error such as:
 Reliance on inappropriate sales evidence
 Poor analysis of sales evidence,
 Failure to adequately inspect the property,
 Use of incorrect methodology or improperly applied methodology;
And that which relates to valuation accuracy and may be impacted by economic
cycles.
An indemnity is a sum paid by an indemnitor (or insurer) by way of compensation for a loss
suffered by an indemnitee.
The indemnitor may or may not be responsible for the loss suffered by the indemnitee.
Forms of indemnity include cash payments, repairs, replacement, and reinstatement.
Professional Indemnity or professional Indemnity cover
Insurance that protects professionals such as accountants, lawyers and real property valuers
against negligence and other claims initiated by their clients.
Professional Indemnity Cover is the insurance policy that covers all sums which the insured
professional becomes legally liable to pay as damages to third party in respect of any error,
negligence and/or omission on his or her part committed whilst rendering professional
service. With the prior consent of the insurance company, this policy may also cover legal
cost and expenses incurred in the defence of the case.
It is required by professionals who have expertise in a specific area because general liability
insurance do not offer protection against claims arising out of business or professional
practices such as negligence, malpractice or misrepresentation.
It only covers claims made during the policy period while the insured was executing their
professional work

N.B: Negligence will be proved only when the following conditions are satisfied;
• Existence of duty of care
• Breach of this duty
• Injury or losses suffered by a person or property damaged as a result of that breach
 Unethical advertising Behaviour not expected of a professional Valuer

a) false self-presentations (in any form) of the professional valuer as a member of the
Institute, a professional association or some other entity;

b) false presentations of one's own professional competence and/or ethical values or of

somebody else's professional competence and/or ethical values;

c) false presentations of one's own past and current services to clients or in advertising by
references made to clients without their permission and listing of clients;
• Ethical Dilemma also known as Moral Dilemma/ Ethical Paradox refers to a situation in
which there is a choice to be made between two options, neither of which resolves the
situation in an ethically acceptable fashion.
• This is a moral situation in which a choice has to be made between two equally
undesirable alternatives

• Threats and Safe Guards

Ethical Threats refers to any situation where a professional person or organization is
tempted not to follow /comply their code of ethics and to compromise their fundamental
ethical principles.
Safeguards are actions or other measures that may eliminate threats or reduce them to
an acceptable level.

Categories of threats to a professional Valuer

Threats to a professional valuer's ability to comply with the fundamental principles may be
created by a broad range of relationships and circumstances. A circumstance or
relationship may create more than one threat, and a threat may affect compliance with
more than one fundamental principle.

Threats fall into one or more of the following categories:

• Self-interest threat – the threat that a financial or other interest will inappropriately
influence the professional valuer’s judgement or behaviour;
• Self-review threat – the threat that a professional valuer will not appropriately
evaluate the results of a previous judgement made or service performed, or by another
individual within the same firm or employing organisation, on which the professional
valuer may rely when forming a judgement as part of providing a current service;
• Client conflict threat – the threat that two or more clients may have opposing or
conflicting interests in the outcome of a valuation;
• Advocacy threat – the threat that a professional valuer will promote a client’s or
employer’s position to the point that their objectivity is compromised;
• Familiarity threat – the threat that due to a long or close relationship with a client or
employer, a professional valuer may be too sympathetic to their interests or too
accepting of their work;
• Intimidation threat – the threat that a professional valuer will be deterred from acting
objectively because of actual or perceived pressures, including attempts to exercise
undue influence over the valuation opinion.
• Broad categories of Safeguards include:
• Safeguards contained in statutes or regulations relating to the purpose of the
valuation;
• Safeguards contained in rules of behaviour (the Code of ethics) issued by a
professional valuers' association to which the professional valuer belongs;
• Safeguards, contained in a firm's internal working procedures and quality controls.
Ethics for Real Estate Agents /Brokers
Ethical conduct of agents expected by regulator bodies and demanded by consumers:
1. General duty to principal: An agent must act in the best interests of his or her principal
except where it would be unreasonable or improper to do so.
2. Certain inducements prohibited: (1) An agent must not knowingly induce or attempt to
induce (encourage, convince) a person to breach a contract of sale, letting or agency. (2)
An agent must not knowingly induce or attempt to induce a person to enter into an agency
contract which would make that person liable to pay commission to more than one agent
in relation to a sale or a lease of any real estate or business.
3. Duty to behave fairly: (1) An agent must act fairly and honestly. (2) An agent must not
knowingly mislead or deceive any parties in negotiations or a transaction. (3) An agent
must not engage in harsh or unconscionable conduct.
4. Standard of service: An agent must exercise due skill, care and diligence.
5. Duties as to details of the transaction: (1) Prior to the execution by the agent’s principal
of any contract relating to the sale or lease of any real estate or business the agent must
make all reasonable efforts to ascertain or verify the facts which are material to that
transaction which a prudent agent would have ascertained. (2) If an agent ascertains a fact
which is material to a transaction in which the agent’s principal is involved the agent must
promptly communicate that fact to any person who may be affected by it unless it is clear
that person was already aware of that fact.
6. Conflict of interest:
(1) An agent must not accept an engagement to act, or continue to act, where to do so
would place his or her interest in conflict with that of the principal.
(2) An agent shall not without the prior written consent of the principal, directly or
indirectly, purchase or take on lease or be in any way concerned or interested, legally or
beneficially, in the purchase or taking on lease of any real estate or business which the agent
is engaged to sell or lease.
7. Disclosure required when recommending:
 (1 ) An agent who recommends to a party to a transaction, a settlement agent, finance
broker or any other supplier of goods or services, must make a written disclosure to the
party of any significant relationship, connection or affinity between the agent and the
supplier.
(2) Where the relationship, connection or affinity between the agent and the supplier is
capable of producing a conflict between the interests of the party to the transaction and
the agent, the agent shall include in such written disclosure an explanation of the nature of
the potential conflict.