The Real Estate Brokerage Law is a set of legal rules regulating the brokerage of real estate deals, including via online brokerage, in exchange for a commission. It also governs real estate services, which are activities related to real estate, its marketing, management, sale, sale of its usufruct, and lease in the Kingdom of Saudi Arabia.
Contents of the Real Estate Brokerage Law
The Real Estate Brokerage Law comprises twenty-four articles. It includes the definitions, objectives of the law, and provisions on the license to practice the activity, powers of the Real Estate General Authority, powers of the Board of Directors of the Real Estate General Authority, the brokerage contract, obligations of the real estate broker, deposit and commission, control and inspection, detection of violations, penalties, and promulgation of the law's implementing regulations.
Upon its promulgation, the Real Estate Brokerage Law revoked the Real Estate Office Regulations, issued by resolution of the Council of Ministers on February 15, 1978. The law was promulgated by Royal Decree issued on June 29, 2022, and the resolution of the Council of Ministers, issued on June 30, 2022.
Tasks of the Real Estate General Authority Law under the Real Estate Brokerage Law
The provisions of the Real Estate Brokerage Law apply to anyone who practices, deals in, or benefits from real estate brokerage or real estate services. It also prohibits the practice of real estate brokerage and the provision of real estate services unless a license is obtained from the Real Estate General Authority.
The Real Estate Brokerage Law entrusts the Real Estate General Authority with the tasks of adopting regulations for the activities and services covered by the authority's mandate, adopting the standards and controls related to the practice of real estate brokerage, and preparing the mandatory and preliminary contract models prescribed under the law.
The tasks also include preparing programs and devising mechanisms to foster the practice of real estate brokerage and real estate services covered by the provisions of the Real Estate Brokerage Law, determining requirements and specifications for real estate marketing means, adopting the standards and controls related to the practice of real estate brokerage, and specifying real estate services that can be provided by a real estate broker as well as their related controls and conditions.
The Real Estate Brokerage Law also determines the responsibilities of the Board of Directors of the Real Estate General Authority. These include adopting the standards and controls related to the practice of real estate brokerage, adopting the regulations for the activities and services covered by the authority's mandate, adopting procedures for detecting violations, receiving reports and complaints, determining the fees for obtaining and renewing the licenses issued by the authority under the law, determining complementary real estate services that can be provided by the real estate broker, in coordination with the licensed entities, and determining the real estate services that can be provided by the real estate broker as well as their related controls and conditions.
Objectives of the Real Estate Brokerage Law
The Real Estate Brokerage Law aims to define the complementary real estate services that can be provided by the real estate broker, in coordination with the licensed entities. It also seeks to adopt procedures for detecting violations and receiving reports and complaints.
Controls upon brokerage under the Real Estate Brokerage Law
The Real Estate Brokerage Law specifies the controls for brokerage, including that the brokerage contract must be in writing, and that the broker must deposit a copy of the contract with the Real Estate General Authority. In addition, the brokerage contract must be for a limited term. The real estate broker is entitled to conclude a contract with one or more other real estate brokers for the brokerage of the property covered by the brokerage contract.
The law requires the real estate broker to obtain a copy of the proof of ownership of the property or the ownership of the usufruct, as well as the information and documents specified under the law's implementing regulations upon concluding the brokerage contract with the owner of the property or the owner of the usufruct.
Obligations of the real estate broker under the Real Estate Brokerage Law
The Real Estate Brokerage Law prescribes the obligations of a real estate broker. These include abstaining from engaging in any act or refraining from executing any act that harms the interests of those who deal with him or conflicts with the provisions of the law, executing the activity himself if he is a natural person, or through the responsible manager or one of his licensed affiliates if he is a legal person, abstaining from disclosing any of the secrets related to the deals covered by brokerage, informing the Real Estate General Authority of any amendment or change related to executing the activity, disclosing the obtained information upon presenting the property, and abstaining from offering any misleading information about the property. The obligations also prescribe adopting transparency and credibility upon practicing brokerage, providing quality and efficient services, and indicating his name and license number in any advertisement or publication related to the property.
The law also requires brokers to register all concluded brokerage contracts and all completed real estate transactions in the electronic platform of the Real Estate General Authority.
According to the Real Estate Brokerage Law, the real estate broker receives the guarantee, if any, and delivers it to the Real Estate General Authority or whoever authorizes it to be maintained therewith until the property is redelivered without damage. The guarantee or the remaining amount thereof is returned to the tenant upon deducting the damage value. Any dispute arising between the landlord and tenant regarding the guarantee and the assessment of the damages it covers is initially resolved by specialized experts determined by the Real Estate General Authority with the consent of both parties. Experts fees are borne equally by both parties. However, should the parties not agree upon the experts' solution, they would be entitled to refer their conflict to the competent court.
Deposit and commission under the Real Estate Brokerage Law
The Real Estate Brokerage Law stipulates that the amount of the deposit for a deal made through a broker is determined by agreement between the parties, where it shall not exceed 5 percent of its value. Should this percentage exceed the aforementioned, the amount shall be considered a down payment for such deal. The amount paid by the buyer or tenant is deemed to be a deposit if such indication is mentioned in writing. Otherwise, it is considered a down payment. In this case, the seller or landlord is not entitled to such amount in the event of contract termination. Upon receipt of the deposit, the seller or landlord should close the deal. If the deal cannot be closed due to the buyer or tenant, where no defects are observed in the property, the deposit is not returned. If the reason for such failure is not due to either of them, the deposit should be returned to the party who paid it.
The law sets the brokerage commission at 2.5 percent of the value of the deal if it is a sale, and only the first year's rent if it is a lease unless the parties to the brokerage contract agree otherwise in writing. The payment of the commission is borne by the party concluding the brokerage contract with the real estate broker.
The real estate broker is entitled to the commission if the real estate deal is closed, according to the brokerage contract, during the contract validity period, or within no more than two months after the contract expiry, provided that he proves that he completed brokerage procedures in this case. He is also entitled to a commission if the real estate deal does not go through, in cases where the seller or landlord would obtain the deposit.
Sanctions and fines prescribed for violators of the Real Estate Brokerage Law
The provisions of the Real Estate Brokerage Law sanction those who practice real estate brokerage and offer real estate services without obtaining a license, as well as those who provide incorrect information to obtain a license, provide misleading information, or conceal material information regarding the property subject to brokerage or real estate services.
Sanctions include warning serving, license suspension for no more than one year, license revocation, and a fine of no more than SAR200,000. Those subject to a sanction may file a grievance before the competent judicial authority within thirty days of being notified of such sanction.
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