Why does the Russian real estate market need better regulation?
Does Russia need a reform of real estate market regulation?
How is the activity of realtors regulated in different countries?
What is the role of notaries in protecting the rights of real estate buyers?
How to protect yourself when buying real estate: key points and risks
Loans and insurance: what challenges await realtors in Russia and abroad?
What is the role of licensing in the real estate sector in Spain and other countries?
How to obtain a real estate license in New Jersey?
How to obtain a professional card for working in real estate in France and Germany?
Many professionals in the real estate sector note that the legal framework governing the housing market in Russia requires significant improvements. It is not uncommon for buyers to encounter unscrupulous realtors and lose their funds. The main issues are vague wording regarding responsibility to clients and the lack of mandatory licensing for agencies. In contrast to Russian practices, most Western countries have a completely different regulatory system in this area. There, realtors are required to meet stricter criteria and are more frequently held financially accountable for mistakes made.
Features of foreignreal estate markets
The features of foreignreal estate markets deserve a closer look. In the USA and the UK, legislation clearly regulates the obligations of realtors to their clients. In several countries, such as Germany, Spain, Latvia, and France, notaries bear greater responsibility for transactions than real estate agents. In America and the United Kingdom, realtors can face penalties for professional negligence. Moreover, in countries like Germany and France, having a license for agents is mandatory.
The legal framework for realtors in Russia
In the Russian market, the legal basis for realtors is currently defined only byCivil Code, which establishes general standards of responsibility towards the buyer, enshrined in sales contracts. In contrast, in the United States, there are many laws regulating the work of realtors and protecting the interests of buyers. According to Ilya Bitkov, an expert at Coldwell Banker, in America, the relationships between agents and their clients are governed by agency laws.Agency Law).
Responsibilities of realtors under the agency law
This law establishes a whole series of obligations that a realtor undertakes, known by the abbreviationOLD CAR, which stands for:
obedienceflawless fulfillment of the client's wishes
loyaltyLoyalty to the client's interests
disclosureopen information
confidentialityconfidentiality
accountabilityresponsibility for one's actions
An important aspect is the principle.reasonable care/diligence("justified caution"), where the agent must carefully verify information that may influence the buyer's decision to purchase real estate.
Ethics and professionalism in the activities of realtors
The agent is not entitled to provide advice in areas where they are not a specialist, such as legal, engineering, or construction matters. Realtors are required to act transparently and without any form of discrimination towards all parties, as established inOn the Fair Housing ActAdditionally, there is a professional code of ethics in the United States established by the National Association of Realtors, compliance with which is mandatory for all professionals.
Conclusions on the regulation of realtors
Thus, in countries with advanced systems for regulating the work of realtors, there are clear laws and standards that protect consumer rights. In Russia, however, there is a need to refine the legislation to increase trust in realtors and defend the interests of buyers in the real estate market. The complexity of the situation lies not only in the lack of sufficient regulation but also in the fact that many buyers are sometimes unaware of their rights and the options that could protect them.
Regulation of real estate agents in the United Kingdom
In the United Kingdom, the activities of real estate agents are regulated by a number of laws and regulations, among which the Estate Agents Act of 1979, the Consumers, Estate Agents and Redress Act of 2007, and the Consumer Rights Regulations of 2012 stand out. Currently, several professional associations are operating to monitor the quality of services provided by agents.
Independent network of real estate agents
National Association of Realtors
These associations aim to establish high standards of practice and enhance professional levels in the real estate sector. Many agents also hold membership inRoyal Institute of Chartered Surveyorsthat implies the need to pass a series of qualifying exams and adhere to established professional standards. Agents also have an obligation toinsurancethat protects their activities from potential risks.
Legal liability of real estate agents in Spain
In Spain, realtors are also subject to legal responsibility, just like other professionals. Mary Dunn, managing director of a real estateagency in Marbella and the Costa del Sol, claims thatAll citizens are subject to equal treatment under the law.In case of violation of rights or harm caused, responsibility lies with the offenders or their organizations according to the law. In this case, the realtor mainly acts as an intermediary, which means they are not always liable for the actions of one of the parties.
Mary also emphasizes that conducting is mandatory.accounting auditall transactions.
The role of notaries in real estate transactions in Spain
Notaries play a key role in legal processes related to real estate in Spain. Natalia Sobol, the commercial director of Costa Blanca Info Property and Grupo Terrasun, notes that the notary is responsible for verifying all documents and has the right to refuse to sign them if discrepancies are found. Agents need to ensure that all documents for the notary have been thoroughly checked and are free of any debts.
According to Natalia, realtors must ensure that all documentation is perfect before handing it over to the notary.
Features of Realtors' Activities in Latvia
In Latvia, the level of responsibility of realtors primarily depends on the individual moral views of each agent. Julia Kukharenok, a rental and sales specialist from Mercury Group, points out thatThere are no strict legal norms in Latvia.and the only risk for the agent lies in their professional reputation.
In cities like Riga and Jurmala, as well as throughout the country, reputation is crucial. In the small real estate market, almost everyone knows each other, and negative reviews can ruin an agent's reputation and end their career. Clients often choose real estate services based on recommendations from people they trust, which highlights the importance of having a good reputation in this field.
Thus, the reputation of agents becomes a fundamental factor in their success in the competitive real estate industry.
Introduction
In today's business world, the reputation of both the company and the agent becomes a decisive factor influencing their image and financial success. Expert Yulia Kukharyonok asserts that in Latvia, there is no need for constant tightening of control over the actions of agents, as all operations are conducted transparently and are regulated by other institutions, such as notaries.
The role of notaries in Latvia
These professionals play a key role inprotection of consumer rights...ensuring the safety of all transactions. In Latvia, the involvement of a notary is mandatory for every transaction, which allows for verification that the property truly belongs to the seller specified in the documents and to identify any potential encumbrances. If such encumbrances are discovered, the notary is obliged to inform the buyer of all the details.
It is worth mentioning that notaries in Latvia operate within a strict licensed system, where the number of available positions is tightly limited. Obtaining a license to work in this field requires serious preparation and a thorough selection of candidates, which highlights the high standards of the profession.
The notary system in France
A similar system of notary work is observed in France as well. As explained by Maria Dichenskova from Michaël Zingraf Real Estate - Christie’s, notaries bear the primary responsibility for protecting the interests of buyers, while agents handle the contracts with sellers and act as intermediaries.
Agents are responsible for the seller's interests.
Notaries are responsible for registering transactions and preparing the necessary documents.
Agents must convey all relevant information, including the results of technical studies.
If defects are discovered in the property after the transaction is completed, and the agent was not informed in advance, the buyer has the option to seek protection through insurance.building damage insurance (BDI)which covers the correction of all actual defects.
Notaries in Germany
In Germany, notaries also bear a greater degree of responsibility compared to real estate agents. Their role is to ensure the safety of the parties involved in real estate transactions. Ilya Gordon, the head of Gordon Commercial, emphasizes that the real estate agent acts solely as an intermediary between the two parties of the agreement.
All necessary inspections are conducted by the buyer at their discretion and at their own expense.
The distribution of responsibility scheme creates safer conditions for the participants in transactions.
Conclusion
It should be noted that the presence of effective control systems and transparency in transactions helps to strengthen trust between parties and supports the growth of the real estate market in countries such as Latvia, France, and Germany. Investments in the knowledge and authority of notaries, as well as a clear understanding of the processes involved in sales, make each transaction more predictable and secure for all parties involved. Thus, it can be said that the notary occupies one of the most significant positions in the buying and selling process, ensuring the protection of clients' rights and interests at a high level.
An example of a situation in real estate buying and selling.
Recently, I came across a remarkable case that illustrates important aspects of the real estate buying and selling process. For example, imagine a person decides to buy a house for 1 million euros. After the deal is completed, they may find that the condition of the acquired property is much worse than they expected.
In this case, the buyer has the right to sue the realtor; however, the judge may ask the question: "Why didn't you familiarize yourself with the technical condition of the property before concluding the deal?" The fact is that in the notarial acts formalizing the purchase and sale, there is usually a clause confirming that the buyer is aware of the condition of the property and has no claims.
The role of notaries in different countries
Unlike countries like Germany, Latvia, or France, notaries in the USA serve a somewhat different function and primarily focus on verifying signatures. According to experts like Ilya Bitkov, the process of buying and selling in the States is carried out through specialized companies that handle property title verification, known astitle companiesor with the help of lawyers representing the interests of both the seller and the buyer.
Professional liability insurance
As for professional liability insurance, in Russia this practice often remains at the discretion of the realtors themselves. Many conscientious professionals have policies in case of issues with transaction procedures. If a deal turns out to be invalid, the insurer is able to compensate for the losses incurred by the client.
A similar situation is observed in Spain: having such insurance is also voluntary. ExpertMary DunnIt emphasizes that this insurance helps to cope with legal costs and losses, including in cases of leakage of confidential client information or when professional errors occur.
Insurance requirements in different countries
In Latvia, the legislation does not require agents to have mandatory liability insurance. However, such requirements exist in France and the USA. In the USA, according to Ilya Bitkov, the actions of realtors, lawyers, as well as qualified specialists involved in preparing mortgage documents and companies that verify property rights are insured.
Insurance before closing the deal
Before finalizing a deal, the buyer is often required to obtain insurance that will protect them from potential errors that may occur during the registration or transfer of ownership rights. Although such insurance becomes mandatory only when securing a loan, in practice, most attorneys and title companies require it to be in place before proceeding with the transaction.
From Ilya Bitkov's experience, it is known that there have been cases where buyers tried to avoid obtaining this insurance, citing its high cost, which could exceed $5,000, but ultimately they faced the necessity of obtaining it to complete the transaction.
Issues with loan processing
The issue of clients obtaining loans was not relevant, and in such a situation, lawyers would prefer to lose their jobs rather than accept such conditions. If problems arise, the lack of insurance could serve as grounds for claims against the lawyer, as they were obligated to warn their client about the seriousness of potential risks in such a situation.
Insurance for real estate agents' professional activities
As Ilya Bitkov claims, in most cases, the responsibility for insuring the professional activities of real estate agents falls on the organization where the specialist works. Insurance for the professional activities of a real estate agent covers protection against possible professional mistakes and shortcomings, which is also referred to as insurance against omissions and errors.
Dispute resolution in the UK and the USA
When it comes to dispute resolution, realtors in the UK and the US do not go unpunished for mistakes in their work.
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In addition, there is an organization in the country called the Ombudsman for Estate Agents (OEA), which brings together many real estate agents. This organization deals with resolving disputes between agents and their clients. In cases of consumer rights violations, the OEA has the authority to require agents to compensate clients for losses of up to £25,000.
Scope of responsibility in the USA
Ilya Bitkov also points out that in the USA, customer complaints and discussions between agents are reviewed by a special commission in each state, known as the Real Estate Commission. There is an extensive list of violations for which the commission can temporarily suspend licenses or completely revoke them, and there are penalties even for minor infractions.
Agents can be penalized for careless documentation practices.
Clients have the right to initiate legal proceedings in the presence of serious violations.
The insurance payout limits in such cases are at a high level.
The situation in Russia
In Russia, there is no requirement for licenses to carry out real estate transactions. Additionally, there are no educational institutions in the country that can train realtors. Only short-term courses are offered, but they cannot guarantee that specialists will be trained to a sufficient level.
In most Russian agencies, there are realtors who lack the necessary professional skills and experience, and sometimes even basic knowledge of the current legislation.
Lack of licenses in Latvia
A similar situation is observed in Latvia, where licenses are also not mandatory for professional activities in this field. This creates certain risks for both clients and specialists in the real estate market, increasing the likelihood of mistakes and violations by agents.
It is important to note that the lack of an effective licensing system and professional training can negatively impact the overall reputation of the entire industry, as well as the level of trust from consumers.
Currently, a private enterprise known as Lanida is actively operating in Spain, specializing in issuing licenses for real estate market participants. This organization is actively promoting a bill that requires all professionals working in this field to have a license. However, it is worth noting that the process of passing such laws can take quite a long time.
In addition, this company organizes training programs, seminars, and open dialogues aimed at increasing knowledge in the field of real estate. Association members are required to pay fees to maintain their membership. The license provided by Lanida serves as proof of the agent's qualifications when working with clients and confirms their successful completion of the relevant courses.
Regional differences in licensing
Regulation of real estate licensing in Spain varies by region. For example, in places like Alicante and the Costa Blanca, obtaining a license to open an agency is not a strict requirement. In contrast, in Barcelona, having a license remains mandatory.
As Natalia Sobol notes, in the Costa Blanca region, almost anyone can open an agency, even without special education. However, our agency has obtained a license, which gives us certain competitive advantages. When developers start marketing their properties, they pass the information to the licensing company, and only after that does the data go to those agencies that have the appropriate licenses.
The role of professional associations
In Spain, licenses are typically issued by professional associations. Similar to other professional organizations (such as lawyers and notaries), real estate associations provide their members with insurance services and can guarantee a high level of professional skills and service quality.
In order to become part of such an organization, a company must meet all the established requirements and criteria, as emphasized by Mary Dunn.
Comparison with other countries
The situation in other countries in Europe and the USA has its own differences. For example:
In the United States, obtaining a license is a mandatory requirement for conducting real estate activities.
To obtain a basic real estate seller's license, it is necessary to complete training courses lasting between 40 to 90 hours.
These courses are usually offered by real estate agencies.
At the end of the training process, you need to take an exam that tests your knowledge of current legislation and sales procedures.
It is also possible to improve qualifications by taking additional courses and passing an exam to obtain a real estate agent license.
Requirements by states in the USA
However, the process of accessing the license and obtaining it may vary depending on the state. For example:
To become a broker in California and Florida, you need to have at least two years of experience working with a real estate sales license.
In Indiana, this experience must be at least one year.
And in Arizona — three years.
Such requirements create additional barriers to market entry, which contributes to raising standards and the overall quality of the real estate sector.
Real estate licensing in New Jersey
According to Ilya Bitkov's words, in New Jersey, any license required for professional activities must be registered with a specialized authority within one year of its issuance. If this requirement is not met, the license will be revoked, and specific steps will need to be taken to restore it.
Broker's license
In addition, there is a second category of license in this state known as the broker associate license. Unlike real estate salespersons, brokers have the right not only to close deals but also to open and manage their own agencies.
How to become a broker
To obtain broker status, it is necessary to:
Start by working with the basic license;
Take several specialized courses.
Successfully pass the qualifying exam.
In several other states, the differences between the two categories of licenses are not as obvious, and a single licensing document may apply. However, a broker's license is not permanent. For example, in California, it requires renewal every four years, which also involves completing continuing education courses.
Mutual recognition of licenses
It is noteworthy that in some states there is a system of mutual recognition of licenses. This means that a license obtained in one state can be used in another. However, such schemes do not apply in California.
Realtors in the USA
In the United States, the term "realtor" is also widely used, which is a registered trademark of the National Association of Realtors (NAR). Only those professionals who are accredited members of this association are allowed to use this designation. Moreover, many agencies may refuse to hire a candidate if they are not an active member of the NAR.
Annual licensing costs
How does Ilya Bitkov divide his expenses? His annual costs related to maintaining his license and membership in professional associations amount to approximately $4,000 to $5,000. It should be noted that these expenses can be somewhat reduced by minimizing participation in real estate associations and the number of memberships.
Real estate licensing in France
A similar situation is observed in France: here, realtors also do not have the right to receive commissions without a valid license. A real estate agent must possess a special permit known as a professional card (carte professionnelle). This permit is issued by the local prefecture and confirms the realtor's qualifications.
Types of professional cards in France
There are three categories of such cards in the country:
Map "T" (from the word transaction — "deal"), operating for ten years and intended for the sale of real estate;
Map "G" (from the word gestion — "management"), which is necessary for those who are involved in property management;
Map for list sellers (list merchant).
Obtaining a professional card in France
To obtain a professional card in France, it is necessary to meet certain requirements and have the appropriate education. Candidates must hold a bachelor's degree that confirms the completion of full secondary education, as well as complete courses over three years in fields such as law, economics, or commerce.
As an alternative, diplomas from technical institutes (Institut Universitaire de Technologie, IUT) or higher technical education diplomas, such as Brevet de Technicien Supérieur (BTS), in the field of real estate are acceptable. Additionally, diplomas issued by economic and legal institutes specializing in construction, sales, and real estate management are also considered.
The suitable qualifications also include:
Architects' diplomas
Documents obtained from the Higher School of Real Estate Professions (Ecole Supérieure des Professions Immobilières, ESPI)
The influence of professional cards
Professional cards issued in France allow their holders to grant licenses to their employees, who can exercise their powers. Employees without such cards do not have the legal right to enter into contracts or provide legal advice, making the possession of a card a necessary condition for conducting professional activities in this segment.
Requirements for real estate agents in Germany
In Germany, to work as a realtor, specific education and a brokerage license are required. Individuals with convictions for theft, fraud, or those involved in bankruptcy proceedings cannot obtain such a license. There are specialized courses for realtors in the country, conducted by the Association of Real Estate Professionals (Immobilienverband Deutschland, IVD).
Ilya Gordon emphasizes that the work of a realtor in Germany requires licensing, and the absence of such a license can lead to serious penalties, including the revocation of the right to engage in business activities in the country. Licenses are only issued to local residents, such as citizens or individuals with a residence permit, and the application review process can take up to eight weeks.
People with legal issues, such as criminal liability or tax debts, will not be able to obtain it. The cost of the license is about 650 euros, and this amount is paid once.
Guarantees of safety when selling real estate
When selling foreignreal estate, realtors provide clients with various guarantees for safe transactions. For example, in France, they gather all the necessary documents, including:
Technical documents
Diagnostic reports
Proof of ownership
All information about the property is displayed in the cadastral plan, allowing potential buyers to familiarize themselves with all aspects of the property being purchased even before signing the deal, which helps reduce risks.
Responsibilities of real estate agents in the UK
In the UK, legislation requires real estate agents to inform buyers of all known defects that may be associated with the chosen property. This not only provides additional guarantees but also enhances the level of trust between realtors and their clients.
This approach ensures a higher level of client awareness and simplifies the decision-making process when purchasing real estate, which contributes to safer and more transparent transactions.
Conclusion
In conclusion, after examining international practices for regulating the real estate market, I have come to the conclusion that the Russian market needs significant changes. Against the backdrop of well-structured consumer protection systems in countries such as the USA, the UK, Germany, and Spain, the legislation of the Russian Federation appears to be underdeveloped and lags behind modern requirements.
Insufficient protection of consumer rightsThe uncertainty regarding the responsibility of realtors and the lack of mandatory licensing create a fertile ground for unscrupulous practices. This highlights the importance of implementing stricter norms and regulations that would not only protect the interests of buyers but also enhance the overall level of trust in real estate professionals.
Lessons from international experience
Studying the experience of Western countries, one can notice how important it is:
the existence of legislative acts regulating the activities of realtors;
self-regulating organizations;
professional codes
systems that promote increased accountability of agents to clients.
The implementation of similar mechanisms in Russia could not only be a step towards improving the market situation but also serve as an incentive for the overall development of the real estate profession.
Hope for change
I hope that in the future we will see changes in legislation that will create a safe and transparent environment for all participants in the real estate market. Addressing these issues is extremely relevant and requires discussion both at the state level and among professional associations.
Only through joint efforts can we create a market where the rights of every consumer are protected, and the work of realtors is based on honesty and professionalism.
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