MMR: The Real Estate Mediation Act will take effect from February

Prague - The Law on Real Estate Brokerage will take effect at the beginning of February. The head of the real estate department at the Ministry for Regional Development, Pavel Rakouš, stated this at a professional seminar today. The norm has successfully passed through the Chamber of Deputies and the Senate, and the President's signature is still needed for approval. The law will change the current free trade into a regulated trade with requirements for professional qualifications. According to Rakouš, the preparation of the law, which aims to improve the functioning of the real estate market and protect the clients of real estate agencies, took eight years.

The law provides five options for practicing the profession. The first is a university degree in legal, economic, construction, or other relevant fields. The second option is another university, higher vocational, or secondary education. However, in this category, three years of industry experience is required. Additionally, there are international recognition or bachelor's education along with an MBA degree in the field of real estate and one year of experience. Regardless of education, passing a professional examination is sufficient. "We received an inquiry from a broker with basic education and fifteen years of experience. He will have to pass the exam. However, in his case, I have no doubt that he will be successful," said Rakouš.

According to Rakouš, the existing real estate brokers have six months to apply for a change from free to regulated trade, meaning to provide proof of education, experience, or passing the exam. Those entering the field must present these documents immediately upon applying.

Regarding the recognition of experience, it should not be a problem in employment. It will be more complicated for self-employed individuals. "Mechanical proof of a valid free trade for several years says nothing about how long a given person has actually performed this activity. They will have the opportunity to provide a tax return that shows they predominantly derived their income from these activities," added Rakouš. Another option is documentation of payment of health and social insurance, from which the basis for its calculation could be derived.

Experience may also be recognized in related professions, such as developers, insurance brokers (primarily property insurance), or mortgage brokers.

The norm aims to prevent brokers from claiming commission from both the seller and the buyer. The proposal also regulates the details of the brokerage contract, which will have to be exclusively in writing and will not bind the client to purchase or sell property. According to the proposal, brokers will have to inform interested parties of the defects of the property.

The law provides for professional liability insurance of the real estate broker for an amount of at least 1.75 million crowns. Brokers working under a contract under the brand of a real estate company would only need half the insurance. If the broker does not insure themselves, they risk a fine of up to one million.

The Chamber of Deputies amended the proposal regarding the provision of money escrow. Real estate agencies will be able to provide it, but exclusively upon written request from the client and on special accounts. They will also have the right to offer escrow services to clients through banks, foreign banks, notaries, lawyers, or in connection with enforcement and other court proceedings, including bailiffs.

According to data from the Czech Statistical Office, there were a total of 14,602 business entities engaged in brokerage activities in the Czech Republic at the end of 2018. That means there is approximately one broker for every 720 residents, which is the lowest ratio in Europe. In Germany, which ranks last in this European comparison, the number of residents per broker is ten times higher.