New Real Estate Brokerage Act to enhance consumer rights

A real estate brokerage agreement that a realtor concludes with a party interested to buy, sell, lease or acquire the right to use real property must be in writing. Furthermore, it must not be contained in the same deed as the real property contract (i.e. the contract whereby the ownership title to real estate is transferred or the right to use and/or enjoy the profits of real estate is established). The agreement also has to contain essentials stipulated by law, such as the identification (at least in general terms) of the subject of the transfer/use/enjoyment of profits; the purchase price/rent/other consideration or the manner of its determination (at least in general terms) if the real property contract is for consideration, and any commission or the manner of its determination.

A real estate brokerage agreement that has not been concluded in writing, does not include the required essentials, or is a part of same deed as the real property contract may be rendered invalid. However, such invalidity may only be invoked by the interested party, not by the broker.

No later than on the day of concluding a real estate brokerage agreement, the real estate broker must provide the interested party (other than the real estate owner) with an extract from the Real Estate Register concerning the subject of the real estate brokerage. The extract must not be older that three working days, otherwise the interested party may withdraw from the agreement within 14 days from its conclusion.

The interested party may also withdraw from the real estate brokerage agreement if the real estate broker fails to meet their statutory duty to provide information about:

• concrete defects and limitations of the subject of the transfer, the use or enjoyment of profits as per public registers, as well as those that the realtor was or should have been aware of due to their professional qualification;
• the amount of commission or the manner of determining it, should another brokerage agreement have been concluded on the same subject of transfer.

Special protection will be awarded to consumers, i.e. interested parties who enter into contractual relationships outside their business or profession. Apart from the above, the following shall also apply:

• The real estate brokerage agreement cannot impose a duty to enter into a real property contract or an agreement on future real property contract.
• If the real estate brokerage agreement has been concluded for an indefinite term, the termination notice period shall be a maximum of one month.
• Exclusive real estate brokerage may only be agreed-upon for a fixed term, no longer than 6 months (may be extended repeatedly, no earlier, however, than 30 days before the agreed upon term expires).
• Advance payments for commission shall not amount to more than two thirds of the agreed-upon commission.
•  If, due to the realtor’s inactivity, error or failure to provide necessary collaboration, a real property contract is only concluded after the obligation under the real estate brokerage agreement had terminated, the realtor may not demand commission from the interest party.
•  A consumer’s debt cannot be settled or secured by a bill of exchange/promissory note or a cheque.

Should the real estate brokerage agreement contain any of the above listed prohibited clauses, the arrangement will be invalid and unenforceable against the interested party.

We believe that the Real Estate Brokerage Act will meet its purpose, which is to protect consumers and improve the quality of services in the real estate sector. Hopefully, it will prevent or at least significantly limit the unfair practices currently followed by real estate brokers.