Concept of Certification of Real Estate Agents in Latvia
The study analyses the following matters:
(1) Framework of the European Communities’ legislative acts regarding the regulation of
Estate Agents’ professional activity by the European Union Member States (“Member
States”);
(2) Several Member States’ experience of regulation of Estate Agents’ professional activity;
(3) Opportunities for and models of regulation of Estate Agents’ professional activity in
Latvia.
The study offers, on a conceptual level, possible models for the regulation of Estate Agents’
professional activity and the key amendments to the laws and regulations that are necessary to
introduce these models.
Please take into consideration that the study does not look into the opportunities for other Member
States’ Estate Agents to provide Estate Agent services in Latvia, should any of the models of
regulation of Estate Agents’ services indicated in the study be introduced in Latvia.
1.
OPPORTUNITIES AND NEED FOR REGULATION IN LATVIA
1.1.
Regulation at the European Communities Level
Pursuant to the legal framework for regulation of services at the European Communities’ level 1,
there are no specific uniform regulations on the provision of Estate Agents’ services at the
European Communities’ level. According to Directive 2006/123/EC of the European
Parliament and of the Council on services in the internal market ( “Directive”), regulations
on the provision of services such as Estate Agents’ services are determined by Member
States.
This notwithstanding, Member States, in evaluating the need for regulating the provision of given
services and in choosing an applicable regulatory system, have to observe restrictions imposed by
the Directive regarding the introduction of a system regulating the provision of services and it
being effective.
1
Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market
For instance, the Directive provides that Member States must not make access to a service activity or the exercise thereof
subject to an authorisation scheme unless the following conditions are satisfied 2:
(1) The authorisation scheme does not discriminate against the provider in question (prohibition of
discriminatory requirements);
However, the authorisation scheme may be discriminatory if the requirements, which apply to access to service activity or to
provision of services, are based directly or indirectly on nationality or, in the case of companies, the location of the registered
office.3
(2) The need for the authorisation scheme is based on overriding reasons relating to the public interest (principle of
necessity);
Such overriding reasons relating to the public interest include, but are not limited to, the following grounds: public security,
the protection of consumers and recipients of services, fairness of trade transactions and combating fraud.4
(3) The objective pursued cannot be attained by means of a less restrictive measure, in particular because an a
posteriori inspection would take place too late to be genuinely effective (principle of proportionality).
The requirements must not go beyond what is necessary to attain the objective and it must not be possible to replace those
requirements with other, less restrictive measures which attain the same result.5
Furthermore, according to the Directive, regulations on access to, or the exercise of, a service activity must not permit the
following:
(1) The direct or indirect involvement of competing operators, including with consultative bodies, in the granting
of authorisations or in the adoption of other decisions of the competent authorities, with the exception of
professional bodies and associations or other organisations acting as the competent authority; 6
(2) An obligation on the provider to have been pre-registered, for a given period, in the registers held in Member
States’ territory or to have previously exercised the activity for a given period in their territory;7
(3) An obligation on the provider established in another Member State to also have an establishment in the Member
State where measures regulating the exercise of the service activity in question are being introduced;8
(4) An obligation on the provider established in another Member State to obtain an authorisation from competent
authorities of the Member State (where measures regulating the exercise of the service activity in question are being
introduced) including entry in a register or registration with a professional body or association in their territory,
except where provided for in this Directive or other instruments of European Community law.9
1.2.
Need for Regulation in Latvia
The laws and regulations of Latvia currently do not provide for restrictions or compulsory requirements that would regulate
Estate Agents’ service activity, except for a few provisions in the Commercial Law that concern the activity of brokers and
commercial agents. 10 This means that persons without the required education, knowledge, experience, and persons who
do not meet the relevant professional and ethical standards also may provide Estate Agents’ services in Latvia.
Therefore, and as LANĪDA has established on multiple occasions, unprofessional and dishonest persons offer their brokerage
services in the estate market, whose unprofessional (and often malicious and criminal) activity results in people who accept
such services losing their money and homes and getting involved in endless lawsuits. In turn, as a result of such persons’
activity, Estate Agents respected for their professionalism and integrity lose customers’ trust, and the profession of Estate
Agents suffers sustains significant damage. Furthermore, taking into consideration that many of these persons do not declare
their incomes from providing brokerage services in the estate market, the state fails to collect remarkable amounts of money in
2
Directive, Article 9
Directive, Article 14(1)
4
Directive, Article 4(8)
5
Directive, Article 15(3)(c)
6
Directive, Article 14(6)
7
Directive, Article 14(8)
8
Directive, Article 16(2)(a)
9
Directive, Article 16(2)(b)
10
Commercial Law, Divisions 6 and 7
3
taxes.11
Several state institutions have also confirmed that the activity of unprofessional persons engaged in estate business is
damaging to the interests of society as well as of the state. For instance, the Consumer Rights Protection Centre has
acknowledged that it receives consumers’ complaints about unprofessional or malicious activity of brokers.12 The
Economic Police Department has also informed that it often receives complaints about dishonest and illegal actions of
persons providing estate brokerage services: misappropriation of funds, deceiving customers, unprofessional conduct in
failing to complete estate transactions, as a result of which residents lose time and money, and sometimes even the
property in question.13 Likewise, the State Revenue Service14 and the Riga City Council15 have admitted that the relevant
authorities have received complaints about unprofessional or malicious actions of brokers. Several government authorities, such
as the Ministry of Finance16 and Ministry of Justice17, have recognised the need to bring order to the real estate business in
Latvia.
Because of this, and in the context of the requirements of the Directive, regulation of Estate Agents’ services at the national
level, including certification/registration of Estate Agents (introduction of an authorisation system), is necessitated and
justified by particularly important reasons related to public interest: protection of consumers and recipients of services,
fairness of trade transactions and combating fraud.
2.
EXPERIENCE OF OTHER EUROPEAN COUNTRIES
The extent of regulation of Estate Agents’ services differs from one Member State to another. For example, receiving
authorisation is not a precondition for the provision of Estate Agent’s services in the Netherlands, whereas in several other
Member States, such as Sweden, Denmark, Belgium, Slovakia and Portugal, a person that wishes to provide services of an
Estate Agent has to receive a certificate (authorisation) issued by a competent authority, or register with the relevant
register.18
Below is a description of the basic principles of the regulatory systems for Estate Agents’ services in 3 Member States:
Sweden, Denmark and Belgium.
2.1.
Sweden
2.1.1.
Authorisation System
A compulsory precondition for an Estate Agent’s professional activity in Sweden is the natural person’s registration with
the Swedish Estate Agents Inspectorate; members of the Inspectorate’s Disciplinary Board are confirmed by the
Government.19
An Estate Agent does not need to register if the Estate Agent is a member of the Swedish Council of Attorneys at Law or
if the Estate Agent is engaged solely in brokerage of municipal rental tenancies, free brokerage of rental tenancies to
university staff members, brokerage of rental tenancies for recreational purposes, brokerage of rental tenancies for
commercial premises, brokerage of rental tenancies where the rental period is a maximum of 2 weeks. 20
2.1.2.
Main Registration Criteria
The following are some of the criteria that a person wishing to register as an Estate Agent has to meet:
11
This situation has also been described in LANĪDA letter No. Nr. 02/01.2006 of 23.01.2006 sent to the Council for the Prevention of Laundering of
Proceeds Derived from Criminal Activity and LANĪDA letter No. 29/03.07 of 08.03.2007 sent to the Prime Minister
12
Consumer Rights Protection Centre’s letter No. 1/07-2573 of 25.07.2003
13 Letter No.
20/2-3 Jur-858 of 2003.07.08 sent by the Economic Police Department of the State Police’s Chief Criminal Police Administration,
Ministry of the Interior
14
State Revenue Service’s letter No. 15.12.2/19328 of 30.07.2003
15
Riga City Council’s letter No. 1.26/RD-03-4777nd of 29.08.2003
16 Finance Ministry’s letter No. 38-02-2/7097 of 31.05.2005
17 Justice Ministry’s letters No. 1-7.8/1557 of 13.04.2007 and No. 1-7.8/2417 of 05.06.2007
18 CEPI (European Council of Real Estate Professions) President Frans AJ Burgering’s address at the conference “Real Estate Professions in the
European Union and the United States” in Warsaw on 30 May 2008; Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator:
Christoph U.Schimid, Study COMP/2006/D3/003, Conveyancing Services Market, Country Fishes, December 2007
19
20
Estate Agents Act (legislation of the Kingdom of Sweden), Section 5, please see: http://www.fastighetsmaklarnamnden.se/
Estate Agents Act (legislation of the Kingdom of Sweden), Section 5
(1) The applicant has the necessary education (the course takes about 2 years);
(2) The applicant has completed 10 weeks of work practice with a registered Estate Agent;
(3) The applicant has passed the registration test.21
2.1.3.
Main Requirements on the Work of Estate Agents
The following are some of the requirements that an Estate Agent has to meet in his or her work:
(1) According to the general principle, the Estate Agent safeguards the interests of both the vendor and the
purchaser;
(2) The Estate Agent has liability insurance;
(3) The Estate Agent provides his or her services based on a contract made in writing.22
2.1.4.
Development of Qualifications
The regulations do not provide requirements on continuing education once the Estate Agent’s status has been obtained
(registration), however, professional organisations (associations) of Estate Agents require Estate Agents to ensure
development (maintenance) of their qualifications, dedicating approximately 3 days a year to the development of
qualifications.23
2.1.5.
Supervisory Body
Professional activity of Estate Agents is monitored by the Swedish Estate Agents Inspectorate. The Swedish Estate
Agents Inspectorate has the following main functions:
(1) Examining applications for registration as an Estate Agent and registration of Estate Agents; (2) Maintenance of a
central register of Estate Agents;
(3) Supervision of Estate Agents, including review of complaints against Estate Agents’ work.24
The Swedish Estate Agents Inspectorate has the right to remove an Estate Agent from the register of Estate Agents if the
Inspectorate establishes violations in the given Estate Agent’s activity.
2.2.
Denmark
2.2.1.
Authorisation System
A compulsory precondition for an Estate Agent’s professional activity in Denmark is the natural person’s registration with
the Register of Estate Agents. Registration of Estate Agents in Denmark is performed by the Ministry of Economic and
Business Affairs.25
Only Estate Agents and attorneys at law registered with the Ministry are allowed to practice as Estate Agents, including
an Estate Agent’s professional activity at an estate agency. An estate agency may belong to a person who is not a
registered Estate Agent. If an attorney is not registered as an Estate Agent, he or she is not allowed to practice as an
Estate Agent.26
2.2.2.
Main Registration Criteria
The following are some of the criteria that a person wishing to register as an Estate Agent has to meet:
(1) The applicant must have has the necessary Estate Agent’s education;
(2) The applicant must have been employed at an Estate Agency for a period of at least 2 years, performing tasks
21
Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 348
22 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 349
23 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 349
24 Please see: http://www.fastighetsmaklarnamnden.se/
25
Please see: http://www.cepi.eu/index.php?page=danmark&hl=en;
http://www.worldproperties.com/CountryBusPractice.aspx?countryID=7&BusinessPracticeID=-1&TypeID=1
26
Please see: http://www.cepi.eu/index.php?page=danmark&hl =en
relevant to an Estate Agency’s work.27
2.2.3.
Main Requirements on the Work of Estate Agents
The following are some of the requirements that an Estate Agent has to meet in his or her work:
(1) According to the general principle, the Estate Agent is not an intermediary, but is representing only one of the
parties;
(2) The Estate Agent must have third party liability insurance;
(3) The Estate Agent must be covered by a financial guarantee (financial risk insurance;
(4) The Estate Agent must have a written contract with the party he or she represents.28
2.2.4.
Development of Qualifications
The regulations do not provide requirements on development (maintenance) of qualifications once the Estate Agent has
received his or her licence.29
2.2.5.
Supervisory Body
The professional activity of Estate Agents in Denmark is monitored, and consumer rights are protected, by several
institutions, including Danish Consumer Council, Danish Consumer Complaints Board, Estate Agency Complaints Board
and Disciplinary Board.30 The Disciplinary Board has the right to order an Estate Agent to halt his or her professional
activity via estate agencies.31
Approximately 95% of Estate Agents are members of the Danish Association of Estate Agents. Association membership
is not compulsory.32
2.3.
2.3.1.
Belgium
Authorisation System
In order to provide an Estate Agent’s services in Belgium, the person must obtain authorisation from Institut professionnel
des agents immobiliers (“IPI”). The IPI only issues authorisations to natural persons.33 The authorisation system does not
apply to salaried staff.34
2.3.2.
Main Registration Criteria
The following are some of the criteria that a person wishing to register as an Estate Agent has to meet:
(1) The applicant must have the necessary academic qualifications (3-year education in real estate business or
higher, for instance, law or engineering);
(2) The applicant has to take a professional training course (1 year).35
2.3.3.
Main Requirements on the Work of Estate Agents
The following are some of the requirements that an Estate Agent has to meet in his or her work:
(1) According to the general principle, the Estate Agent is representing only one of the parties;
27
Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 61
28 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 62; please see: http://www.cepi.eu/index.php?page=danmark&hl=en
29 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 63
30 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 63; please see: http://www.cepi.eu/index.php?page=danmark&hl=en
31 Please see: http://www.cepi.eu/index.php?page=danmark&hl =en
32 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 63
33 Please see:
http://www.immoweb.be/en/pages/Page.cfm?Page=Professional.Federation.content01.htm&mycurrent_section
=gl obal
34
Please see: http://www.cepi.eu/index.php?page=belgique---belgie&hl=en
35 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p . 31; please see: http://www.cepi.eu/index.php?page=belgique---belgie&hl=en
(2) The Estate Agent must have third party liability insurance;
(3) The Estate Agent must have a financial guarantee (bank-issued guarantee);
(4) The Estate Agent provides his or her services based on a contract made in writing.36
2.3.4.
Development of Qualifications
The regulations do not provide requirements on development (maintenance) of qualifications once the Estate Agent has
received his or her authorisation, however, professional associations recommend that Estate Agents continues
development (maintenance) of qualifications by participating in training courses at least 10 hours a year.37
2.3.5.
Supervisory Body
The IPI functions include monitoring of Estate Agents’ work.38 The IPI has the right to cancel an authorisation issued to an
Estate Agent if the IPI establishes violations in the given Estate Agent’s activity.39
3.
POSSIBLE REGULATORY MODELS IN LATVIA
3.1.
Definitions of Estate Agent and Estate Agent’s Services
Taking into consideration the current understanding of the meaning of terms “Estate Agent” and “Estate Agent’s
Services”40, we believe that Estate Agent and Estate Agent’s Services may be defined as follows:
(1) Estate Agent – an entrepreneur who, in his or her name, is engaged in intermediation for concluding real estate
transactions for the benefit of another person, not being permanently associated with such person through
contractual relations;
(2) Estate Agent’s service – intermediation for concluding real estate transactions, which the provider of the service
provides to another person for remuneration, not being permanently associated with such person through contractual
relations.
3.2.
Regulatory Models
3.2.1.
Model No. 1 (“Stringent Regulatory Model”)
Regulation of services provided by Estate Agents within this model would be based on the following principles:
(1) Only those Estate Agents who are included in a register of Estate Agents, created by a competent authority, are
permitted to provide Estate Agent’s services.41 Only the following persons may provide Estate Agent’s services without
being registered with the register of Estate Agents: attorneys at law, assistant attorneys at law, notaries public, assistants
to notaries public, qualified lawyers, attorney at law offices, and persons who provide Estate Agent’s services in the
name of the given Estate Agent (entrepreneur) as employees of the Estate Agent (entrepreneur);
Please note that the above list of persons, who should be retained the right to provide Estate Agent’s services without
being registered with the register of Estate Agents, should not be considered exhaustive.
(2) Registration of Estate Agents is performed by competent authorities accredited by the state agency “Latvian
National Accreditation Bureau”, Ministry of the Economy confirms a list of such authorities.42 For example, any
36
Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, pp. 29, 30 and 30; please see: http://www.cepi.eu/index.php?page=belgique--belgie&hl=en
37 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 31
38 Centre of European Law and Politics (ZERP) University of Bremen, co-ordinator: Christoph U.Schimid, Study COMP/2006/D3/003,
Conveyancing Services Market, Country Fishes, December 2007, p. 31
39 Please see:
http://www.immoweb.be/en/pages/Page.cfm?Page=Professional.Federation.content01.htm&mycurrent_section=global
40
Standard LVS 375 “Services of real estate agents – General requirements”, endorsed on 20.12.2006
41 For instance, entrepreneurs in construction business who are engaged in a commercial activity in areas provided for in the Construction Law have a duty to register with
the Construction Merchant Register (Construction Law, Article 10)
42 The designation of such registration authorities would be in line with the existing practice of certification authorities, which has been developed in
the regulation of other professions, for instance, provision of architect and assessor’s services (Cabinet of Ministers Regulation No. 534 of
09.12.2002 “Procedure of Issuing Professional Qualification Certificate for Property Assessment, Cabinet of Ministers Regulation No. 383 of
professional organisation (association) of Estate Agents that meets the said requirements would be permitted to perform
the registration of Estate Agents;
(3) The regulatory enactment (enactments) on the activity of Estate Agents will describe in detail the following
matters:
(a) Requirements on applicants for the registration of an Estate Agent or assistant Estate Agent (including
documents that have to be submitted along with the application);
For example, the following requirements may be introduced for Estate Agents that are natural persons:
•
The applicant has a degree following the completion of relevant accredited study programmes
and/or has received training during special courses for the development of Estate Agents’
professional qualifications;
•
The applicant has sufficient experience of providing Estate Agent’s services: at least 2-year
experience for Estate Agents, whereas assistant Estate Agents may be exempted from the
experience requirement;
•
The applicant has successfully passed a test of the competent registration authority: the Estate
Agent has successfully defended deals concluded as part of the Estate Agent’s services within a
certain period of time, whereas assistant Estate Agent has successfully passed a theory test on
Estate Agent’s services;
•
The applicant has received a registered Estate Agent’s recommendation;
•
The competent registration authority has not received any substantiated complaints about the
applicant’s professional activity as an Estate Agent;
•
The Applicant has committed no criminal acts or his or her criminal record has been expunged.
On the other hand, the following requirements may be introduced for Estate Agents that are legal entities:
•
The applicant employs at least one person who is registered as an Estate Agent;
•
The competent registration authority has not received any substantiated complaints about the
applicant’s professional activity as an Estate Agent;
(b)
Requirements that deal with the activities of Estate Agents (for instance, the requirement to have
civil liability insurance, requirement to have a written contract with the recipient of Estate
Agent’s services and requirements regarding the content of the contract);
(c)
Information to be indicated in an Estate Agent’s registration certificate;
(d)
Principles of work and competence of the competent authority’s registration commission, decisionmaking procedure and procedure of contesting the authority’s decisions;
(e)
Possible penalties applicable in case Estate Agents violate laws and regulations on Estate Agents’
activities (including the removal from the register of Estate Agents);
At the moment, Section 166.2 of the Latvian Administrative Violations Code provides for administrative liability (a fine)
for commercial activities without registration nor without a special permit (licence), statement or permit. Whereas Section
207 of the Criminal Law stipulates criminal liability for entrepreneurial activities without registration or without a special
permit (licence) where the requirement for such is prescribed by law, if commission of such acts is repeated within a one
year period.
If the new regulation regarding the certification of Estate Agents’ services uses the notion “registration”, correcting
Section 166.2 of the Administrative Violations Code and Section 207 of the Criminal Law should be considered so as
to ensure that the reading of these sections also encompass registration with the register of Estate Agents (as a special
registration, not just as registration of a commercial activity with the Commercial Register).
Furthermore, supplementing Section 166.2 of the Administrative Violations Code with a new provision, envisaging a
08.07.2003 “Regulations on Issuing, Registration and Cancellation of Builder’s or Architect’s Practice Certificate” and Law on Conformity
Assessment)
heavier fine for a repeated violation within a one year period after the application of an administrative penalty, should be
considered (similar to Section 158.2 of the Administrative Violations Code regarding the provision of state regulated
social services without a licence or general authorisation). At the same time, it has to be taken into account that such
criminal and administrative liabilities regarding natural persons would overlap.
(f)
Supervisory authorities and their competences (for example, some of the ministries could supervise
the decisions made by the competent registration authority);
Taking into account the existing ministries in Latvia and their competences provided in the relevant laws and regulations, we
believe that the Ministry of Economy should assume the function of monitoring the Estate Agent services market, including
supervision of the work and decisions of the competent registration authority. For example, according to the charter of the
Ministry of Economy (“Charter”)43, the Ministry of Economy’s functions include the development and implementation of
consumer rights protection policy (Section 5.3.5) and construction business policy (Section 5.3.4), fostering the
development of business environment (Section 5.4) and performing other tasks provided in the relevant laws and regulations
(Section 5.13).
Furthermore, according to the existing regulations on the certification of architects, the Ministry of Economy is also
responsible for the printing of a list of the competent certification authorities in newspaper “Latvijas Vēstnesis”,44 as
well as for the review of decisions of the certification authorities that have been contested,45 and for the maintenance of a
register of builders and architects’ practices.46
(4) Laws and regulations should provide for a mechanism for identification of persons, and preventing such persons
from engagement in the provision of Estate Agent services, who may not provide such services under the relevant laws
and regulations. The existence of such a control mechanism is vitally important for an efficient operation of the system
regulating Estate Agents’ services.
It has to be admitted that exercising such a control mechanism may be problematic, because it means that there has to
be an efficient way to identify such persons who have no right to provide Estate Agent’s services, as well as to ensure
that such persons cannot continue providing Estate Agent’s services when unlawful provision of Estate Agent’s
services is ascertained.
One of the possible ways to identify and prevent unlawful provision of Estate Agent’s services could be inclusion of such
clause in the relevant laws and regulations (for instance, Sections 58 and 61 of the Land Register Law), which would
provide that only such authorised representatives who have the right to provide Estate Agent’s services may request
corroboration (if corroboration is requested by a representative). If an authorised representative requests corroboration, a
document will have to be attached to the request for corroboration, which will confirm the person’s right to provide Estate
Agent’s services: registration certificate for Estate Agents or, for persons who have the right to provide Estate Agent’s
services without being registered as an Estate Agent, a document proving the status or education of such person.
At the same time, it needs to be taken into account that the said control mechanism may be seen disproportionate when
compared to restrictions on individual rights and the benefit that society will derive from such restrictions. Besides, such a
control mechanism would mean additional duties for notaries and land register office judges who will have to examine the
status of an authorised representative requesting corroboration, as well as the person’s right to request corroboration. This
process could also be complicated in terms of uniform criteria for the evaluation of documents acknowledging, for
instance, that the person has the necessary education in law.
3.2.2.
Regulatory Framework for Model No. 1
In order to ensure efficiency of such regulatory model, amendments would have to be made to the relevant laws and
regulations, and new laws and regulations would have to be endorsed.
For instance, we believe that the following amendments should be made to the existing regulatory framework:
(1) The following amendments to Division 7 of the Commercial Law, which regulates activities of brokers,
need to be endorsed:
(a) Section 64 of the Commercial Law needs to be amended in order to specify the definition of a broker:
Cabinet of Ministers’ Regulation No. 238 of 29.04.2003 “Charter of the Ministry of Economy”
Cabinet of Ministers Regulation No. 383 of 08.07.2003 “Regulations on Issuing, Registration and Cancellation of Builder’s or Architect’s Practice
Certificate”, Section 3
45 Cabinet of Ministers Regulation No. 383 of 08.07.2003 “Regulations on Issuing, Registration and Cancellation of Builder’s or Architect’s Practice
Certificate”, Section 17
46 Cabinet of Ministers Regulation No. 383 of 08.07.2003 “Regulations on Issuing, Registration and Cancellation of Builder’s or Architect’s Practice
Certificate”, Section 15
43
44
If a broker is engaged in intermediation for concluding real estate transactions for the benefit of
another person, not being permanently associated with such person through contractual relations, such
a broker shall be considered an Estate Agent;
In the current wording of Section 64 of the Commercial Law, the definition of a “broker” also applies to such entrepreneurs
who are engaged in intermediation for concluding any transactions (not only real estate transactions). The said amendment
to Section 64 of the Commercial Law would differentiate brokers according to the type of transactions, separating brokers
who are engaged in intermediation for concluding real estate transactions. Such definition of an Estate Agent in the
Commercial Law would make it possible to further develop the regulatory framework for the work of Estate Agents.
(b)
Division 7 of the Commercial Law has to be supplemented with provisions that would provide more
precise regulation of services provided by Estate Agents and delegate the Cabinet of Ministers to
issue regulations on the procedure of registration of Estate Agents and the relevant requirements on
Estate Agents, as well as a procedure according to which a competent registration authority will take
decisions and according to which complaints contesting the authority’s decisions will be reviewed
(please see Section 3.2.1 of the given study).
In our opinion, Division 7 of the Commercial Law does not need to describe the rules and procedure of the registration of Estate
Agents, but it should rather stipulate that Estate Agents’ services may be provided by persons who have, according to a
procedure set by the Cabinet of Ministers, registered with the register of Estate Agents (except for several professions indicated
in the study). Furthermore, taking into consideration the current wording of Division 7 of the Commercial Law, specifying
the requirements on the provision of Estate Agent’s services should be considered.
(2) As an alternative, the provisions indicated in Article (1), Subarticle (b) of the given chapter of the study could
be included in a separate regulatory enactment – a law regulating the activity of Estate Agents.
We believe that drafting a special law would, from the standpoint of the system and methodology for drafting regulatory
enactments, be more suitable in the circumstances, although it may be more time consuming.
(3) The Cabinet of Ministers should issue regulations on the procedure of registration of Estate Agents and the
relevant requirements on Estate Agents, as well as a procedure according to which a competent registration
authority will take decisions and according to which complaints contesting the authority’s decisions will be
reviewed (please see Section 3.2.1 of the study);
(4) Amending Section 166.2 of the Administrative Violations Code and Section 207 of the Criminal Law
pursuant to Section 3.2.1, Article (3), Subarticle (e) should be considered;
(5) Amending Sections 58 and 61 of the Land Register Law pursuant to Section 3.2.1, Article (4) of the study
should be considered;
(6) The Law on the Regulated Professions and the Recognition of Professional Qualifications has to be
supplemented in order to provide that the profession of Estate Agent is also a regulated profession.
3.2.3.
Model No. 2 (“Upgraded Self-regulatory Model”)
Regulation of services provided by Estate Agents within this model would be based on the following principles:
(1) Persons who provide Estate Agent services may perform their professional activity without having to register as
Estate Agents. That is, regulatory enactments do not limit the rights of a person to provide the services of an Estate
Agent if the person has obtained an authorisation (certificate/licence/registration) issued by a competent authority;
(2) At the same time, professional associations of Estate Agents may set more stringent requirements on their
members that Estate Agents must observe in their professional activity (ethics codes, standards and rules of
professional activity);
(3) The existing laws and regulations are supplemented with new provisions that regulate the activities of Estate
Agents in greater detail and set requirements that Estate Agents must observe in their work (for instance, the
requirement to have civil liability insurance, requirement to have a written contract with the re cipient of Estate
Agent’s services and requirements regarding the content of the contract);
(4) On the national level, consumers are provided with information about the possible differences in the quality of Estate
Agents’ services and the possible consequences, depending on whether the provider of Estate Agent services is, or is not,
a member of a professional association of Estate Agents. That is, consumers should be informed that, unlike other
persons who are engaged in intermediation, Estate Agents who are members of professional associations are bound to
observe these associations’ requirements on the quality of Estate Agent services.
3.2.4.
Regulatory Framework for Model No. 2
In order to ensure efficiency of such regulatory model, we believe that the following amendments should be made to the
existing regulatory framework:
(1) The following amendments to Division 7 of the Commercial Law, which regulates activities of brokers,
need to be endorsed:
(a)
Section 64 of the Commercial Law needs to be amended in order to specify the definition of a broker
(please see Section 3.2.2, Article (1), Subarticle (a) of the given study);
(b)
Division 7 of the Commercial Law has to be supplemented with provisions that would provide more
precise regulation of requirements that deal with the activities of Estate Agents (for instance, the
requirement to have civil liability insurance, requirement to have a written contract with the
recipient of Estate Agent’s services and requirements regarding the content of the contract);
(2) As an alternative, the provisions indicated in Article (1), Subarticle (b) of the given chapter of the study could
be included in a separate regulatory enactment – a law regulating the activity of Estate Agents. In this case,
however, it should have to be analysed whether drafting of a new law will not be overly time consuming;
(3) In additional to the above or as an alternative, the necessity for, and the possibility of, supplementing Division 7
of the Commercial law with a new provision (or including such provision in a special law as indicated in the given
chapter’s Article (2) of the study), which would make it compulsory for Estate Agents to observe a certain standard
pertaining to the professional activity of Estate Agents. For such a standard to become compulsory, it should be
endorsed by the Cabinet of Ministers. According to LANĪDA’s knowledge at the moment the study was being
done, standard LVS 375 “Services of Real Estate Agents – General Requirements” has been drafted and
approved by the Latvian national standardisation body “Latvian Standard” on 20 December 2006. At the moment,
application of the standard is voluntary. In our opinion, a compulsory binding standard could be drafted, taking into
account the experience of drafting Standard LVS 375.
4.
CONCLUSIONS
Please note that, for the system of regulations on Estate Agents’ services to comply with the Directive, the requirements on the
provision of Estate Agents’ services must meet the principle of non-discrimination, principle of necessity and principle of
proportionality. Therefore, in analysing regulatory models for Estate Agents’ services, compatibility of the proposed
requirements with the said principles should be evaluated in detail.