This year, Act No. 39/2020 Coll., On Real Estate Mediation and on amendments to related acts (the Real Estate Mediation Act) (hereinafter referred to as the “Act”) will enter into force, which newly regulates in particular the obligations of real estate agents.
At present, real estate agency is not regulated in a separate act and since 2008 it has been covered by real estate activities, which are included in Annex No. 4 of the Trade Licensing Act among the subjects of unregulated trades. Apart from the general terms and conditions for pursuing a trade, which are full legal capacity and clean record, it is currently not necessary to meet any other special conditions for the performance of real estate agency.
According to the explanatory memorandum, this current regulation appears to be insufficient and unsatisfactory, mainly due to insufficient client protection, absence of requirements for professional competence of real estate intermediaries and compulsory liability insurance, which results in an overall insufficient quality of services provided by some real estate intermediaries.
What changes does the new act on mediation bring
From the point of view of real estate intermediaries, this is an increase in their obligations in relation to the client and the authorities, when the act introduces the following new obligations:
- Compulsory liability insurance - the real estate agent is now obliged to be insured for the entire period of its activity in the event of the obligation to compensate the applicant for damage caused by pursuing the real estate mediation with a limit of indemnity of at least CZK 1,750,000 per insured event and at least 3,500 000 CZK in case of concurrence of several insured events in one year. The real estate agent shall prove the fulfillment of this obligation by submitting a duplicate or a certified copy of the insurance contract to the Ministry of Regional Development, within 10 days of its conclusion.
- Proof of professional competence - simultaneously with the effectiveness of the new act, the Trade Licensing Act is being changed, when the trade "Real Estate Mediation" is newly included among regulated trades. Those interested in operating this trade must now prove their professional competence by submitting proof of education, or completed experience in connection with the level of education, or by submitting a certificate of completion of a professional examination in accordance with the National Qualifications Framework, for the profession of real estate agent, code: 66-042-M. Entrepreneurs who are authorized to provide real estate agency on the basis of a unregulated trade are obliged to report to the Trade Licensing Office "Real Estate Mediation" within 6 months from the date of entry into force of the Act and to provide documents proving the fulfillment of the condition of professional competence.
- Implementation of a sanction - the act introduces misdemeanor liability of real estate intermediaries in the event that it violates their obligations under the law. Fines of up to CZK 1,000,000 can be imposed for committing offenses under the law.
For clients, the new regulation should mean, in particular, an increase in security when dealing with real estate intermediaries (both due to the need for real estate intermediaries to have compulsory liability insurance and due to the requirements for their professional qualifications). Overall, the legislator hopes that new act will improve the services of real estate intermediaries and increase their competitiveness on the European market.
Contract on real estate mediation and its requirements
A real estate intermediary may provide real estate mediation services only on the basis of a real estate mediation contract, the details of which are regulated by law. In requirements that are not explicitly regulated by law, the general regulation of the brokerage contract according to the Civil Code shall apply.
The brokerage contract must be in writing and contain the following mandatory requirements:
- Designation of the subject of the transfer, or the subject of use or enjoyment (lease or usufructuary lease),
- The amount of the purchase price, rent or other remuneration, or the method of its determination, if the brokerage contract for pecuniary interest,
- The level of the commission or the method of its determination.
The lack of form or absence of any of the mandatory requirements causes relative invalidity, which can only be invoked by the interested party.
On the day of concluding of a brokerage contract, the real estate agent must submit to the applicant an extract from the public register for the subject of real estate mediation, if the real estate, of which this subject is a part, is registered (extract from the real estate cadastre). If the subject of real estate brokerage is not registered in the cadastre, the real estate agent shall submit an extract from the real estate cadastre in which the land of which this subject is a part is registered. This abstract must not be older than 3 working days before the day of concluding the contract. In the event of a breach of this obligation by the real estate agent, the applicant is entitled to withdraw from the brokerage contract within 14 days from the date of its conclusion.
The real estate broker is also obliged to inform the interested party about specific defects and restrictions related to the subject of real estate brokerage, which result from public register (pledges, easements, etc.), and about those that the real estate agent knew or should have known due to its professional competence.
Furthermore, the real estate broker shall provide the interested party with information on the level of the commission or the method of its determination, which he negotiated with a third party, for the same subject of real estate brokerage.
The real estate agent is obliged to provide the above information to the applicant no later than on the day of concluding brokerage contract (if the specific subject of mediation is not known at the time of conclusion, a period of 14 days from the day when the object of brokerage is known). In case of breach of these obligations, the applicant has the right to withdraw from the contract.
The obligation to conclude a real estate contract
In the contract on real estate mediation,
it is not possible to impose on the applicant, if he is the consumer,
the obligation to conclude a real estate contract or a
contract on concluding a future real estate contract. In the case of
an applicant - entrepreneur, this is possible. However, a brokerage
contract may not ever be included in the same document as the
real estate contract.
The date of entry into force of the Act is 3 March 2020. However, there are professional debates about the correctness of determining the date of entry into force, with some believing that the Act will not enter into force until 1 July 2020 (due to a change or abolition of the general legislature) . However, due to caution, I recommend everyone to follow the new act from March 3, 2020.
Author: Aneta Koubková
The Article has been published © EPRAVO.CZ