New law to curb the cowboy real-estate brokers
The Saudi real-estate sector has prospered in recent years, but along with the proliferation of property offers has come a proportionate increase in the volume of complaints about the business. Many property brokers lack professionalism, perhaps because they depend mainly on connections and experience rather than an investment of their own capital; too many clients find that communication with the broker breaks down as soon as they have banked their commission.
A real-estate broker, as the name suggests, is an individual or institution whose role is to mediate between the parties in a property transaction, usually the buyer and seller. The broker is often a means to obtain the most beneficial deal, in return for which they charge a commission agreed upon before the transaction is completed.
Real-estate brokerage may be confused with real-estate marketing, perhaps because they have almost the same aim, but the concepts are different. Marketing may begin before a property has even been built, and the property may be sold based only on the plan. Brokers focus on the sale of finished products, whether land or residential and commercial units.
A new real-estate brokerage law in Saudi has replaced the previous regulation of real-estate offices. The law’s title refers only to real-estate brokerage, but it provides for the regulation of all property services, including marketing, property management, auctions and others.
The law specifies several offenses for which real-estate offices may be referred to the Public Prosecution and the competent courts. They include providing misleading information or concealing material information about property; practicing real-estate brokerage or providing real-estate services without a license; supplying incorrect information to obtain such a license; demanding a commission that exceeds the maximum limit; and employing non-qualified staff in the brokerage or to provide real-estate services.
The Real Estate General Authority may suspend a brokerage’s license until a judicial ruling has been issued, and impose a fine of up to SR200,000. In addition, any real estate marketer who conceals funds received on behalf of parties to a property transaction, or anyone who commits any fraudulent acts in relation to a property auction, may be imprisoned for up to a year. The new law should put an end to the unpredictable nature of the property business, a welcome development after the Saudi Cabinet opened the way for foreign investment in real-estate brokerage, which will increase competition in the sector.
The Real Estate General Authority will play a crucial supervisory role, along with its efforts in adopting the international classification of real-estate brokers, to regulate an important sector that is a cornerstone of the Kingdom’s economy.
Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif