MMR: The Act on Real Estate Mediation will be effective from March 3rd

Prague - The law on real estate mediation will take effect on Tuesday, March 3. The Ministry of Regional Development (MMR), which prepared the regulation, informed CTK today. The biggest change is that the current free trade will change to a regulated trade with requirements for professional qualifications. The preparation of the law, whose main goal is to improve the functioning of the real estate market and protect clients of real estate agencies, took eight years.

For performing the profession, the law provides for five options. The first is a university education in legal, economic, construction, or other relevant fields. The second is another university, higher vocational training, or secondary education. In this category, three years of practice in the field are required. Furthermore, there are international recognition or bachelor's education together with an MBA degree in real estate and one year of practice. Regardless of education, passing a professional exam is sufficient.

According to some analysts, the anticipated decrease in the number of real estate agents will increase their services' prices. "Some of them will disappear from the market, so those who remain will be able to set higher prices for their services. As a result, already exorbitantly expensive and increasingly inaccessible real estate will become even more expensive. Now for a higher price for the services of a real estate agent," said analyst Lukáš Kovanda from Czech Fund to CTK.

Minister for Regional Development Klára Dostálová (for ANO) previously stated that such a thing is unlikely to happen. "Of course, I can't predict the future, but I certainly do not believe that the introduction of the law should raise the prices of real estate agents' services. We must realize that there are many so-called garage agents who do not do this as their profession. And that is exactly what we are targeting with the law. For real estate agents to be insured, have qualifications, and have it as a profession," Dostálová said.

According to MMR, the current real estate intermediaries have six months to apply for a change from a free trade to a regulated one, which means providing proof of education, practice, or passing an exam. Those entering the field newly must present these documents immediately upon application submission.

The regulation aims to prevent, among other things, agents from claiming a commission from both the seller and the buyer. The draft also regulates the requirements for the brokerage contract, which must be exclusively in writing and will not bind the client to purchase or sell real estate. According to the draft, agents must inform interested parties about defects in the property.

The law provides for insurance of professional liability of the real estate intermediary for at least 1.75 million crowns. Agents operating under a contract with a real estate company's brand would only need half of the insurance. If an agent did not insure themselves, they would risk a fine of up to one million crowns.

The House amended the draft on the provision of money custody. Real estate agencies will be able to provide it, but exclusively upon the written request of the client and in special accounts. They will also have the right to offer money custody to clients through banks, foreign banks, notaries, lawyers, or in connection with enforcement and other court proceedings through an executor.

In the Czech Republic, according to statistics at the end of 2018, there were 14,602 business entities registered for mediation activities. Thus, there is about one agent for 720 people, the lowest ratio in Europe.