Ending the shadows in the real estate market and safety for buyers

Montenegro has seen many problems and violations in real estate due to the lack of a specific law regulating this field and the lack of clear conditions for engaging in this activity. Due to the high share of the underground economy in this area, the state loses a significant amount of money from unconfirmed commissions, which are often paid in cash and not reported, undermining cash flow control and taxation. This is, among other things, stated in the Impact Analysis Report on the proposal of the Real Estate and Rental Intermediation Act, submitted by the Ministry of Economic Development (MERT) for public comment by the end of this month.

According to the documents, the main innovations in the proposed law are the creation of a registry of persons involved in real estate transactions and the introduction of a mandatory qualification exam for mediators. According to the proposed law, a citizen who passed the qualification exam must have registration on the territory of Montenegro and at least IV level of qualification, i.e. secondary or vocational education. The exam will be administered twice a year and will consist of an oral and written portion, and agents who fail to pass the exam will be prohibited from practicing mediation. "The qualification exam ensures that agents or real estate agencies have the necessary minimum knowledge of the Law on Legal Relations of Property, planning and construction of objects, state measurement and cadastre, notary, taxes on real estate transactions and other requirements," the report said.

The goal is also to ensure a level playing field for all stakeholders, including foreign citizens, who are becoming more and more numerous in the market and who are not sufficiently familiar with Montenegrin laws. In addition, those who are not registered in the Registry of Intermediaries will not be able to engage in real estate transactions. Among the conditions for registration it is stated that registration in the Central Register of Legal Entities and proof of registration of the intermediary for real estate agency activities, a qualification exam, appropriate business premises and a valid liability agreement are required. In this way, those who qualify to engage in this activity will be registered and the public interest will be protected, while free and easy access to information will be provided through the online registry.

The main problems that the proposed law should address are the high share of the shadow economy in real estate transactions, the low quality of services, the lack of mandatory liability insurance and professional training for intermediaries, and the fact that they are currently not required to provide full real estate documentation.

Registered entities and organizations are exposed to disloyal competition and unregistered individuals who are not liable for deficiencies during transactions, according to the report. It is pointed out that it is necessary to regulate the market as intermediation is often carried out by persons without a license or registration, resulting in serious losses to the state from unconfirmed commissions, so the adoption of the law is key to eliminate or reduce the shadow economy, improve the quality of service and improve the framework for detecting and combating money laundering.

The implementation of these regulations will not harm citizens or the economy and will not result in administrative burdens or barriers to business, the report said. "Since the implementation of the norms does not require financial support from the budget, there is no provision for the adoption of bylaws from which the financial obligations will flow out. Implementation of the norms will not lead to budget revenues," the document explains. In addition, it is noted that external expert analysis was not used to develop the Law, but entrepreneurs pointed out the need for a register, the use of contracts in cooperation and insurance against financial damage caused by professional errors. According to the document, there are no obstacles to the introduction of norms and MERT and the Inspection Affairs Directorate will be responsible for monitoring and evaluating the application of the law.

Citizens who work without registering in the Registry or without a qualification exam face a fine of one thousand to four thousand euros. In addition, under the proposed law, legal entities will pay from four to 40 thousand euros for the same offense, while entrepreneurs will have to pay from two to 12 thousand euros. In addition to a fine, for working without registration in the Registry, a legal entity, entrepreneur or natural person may be banned from mediating real estate transactions for a period of 30 days to six months, as well as a measure of public publication of the decision.

A mediator in real estate transactions must have a contract of liability for damages with an insurance company that may be caused to the customer or third parties during the work. "The minimum sum insured for damages that may be caused by the intermediary may not be less than 20 thousand euros per damage event or 60 thousand euros for all claims in a year of insurance," the document says. In addition, the introduction of an agreement on mediation in real estate transactions is envisaged, according to which the mediator undertakes to seek a person to negotiate and conclude a real estate transaction, and the customer undertakes to pay him remuneration if the transaction is concluded.