The Ministry of Economic Development and Tourism adopted the Draft Law on Real Estate Brokerage. The adoption of this law is motivated primarily by the need to suppress the grey economy that is flourishing in the field of real estate brokerage. The second, equally important motive is the protection of participants and the prevention of abuses and fraud in real estate sales.
The key novelty that this Law brings is the introduction and licensing of the institutes of Real Estate Brokers and Agents in the sales and lease of real estate.
A Real Estate Broker (“Broker”) is a legal entity or entrepreneur that is registered in the public Register of Real Estate Brokers. One of the basic conditions for registration in the Register of Real Estate Brokers is that there is at least one employee with the Broker who works full-time and has passed the professional exam for performing intermediation in the sales and lease of real estate – Agent. The professional exam is conducted by the Chamber of Commerce and is taken before the Commission consisting of at least one member from the Association of Real Estate Brokers and two from the competent Ministry. The condition for taking the professional exam is that the candidate has a domicile or residence in the territory of Montenegro and at least the 4th level of qualifications of the national qualification level, and the exam is taken in the Montenegrin language. Performing the tasks without registration in the Register of Real Estate Brokers is an offence for which a fine of up to EUR 40,000.00 is threatened, while in the event that brokering activities at the Real Estate Broker’s office are performed by a person who has not passed the professional exam, a maximum fine of EUR 10,000.00 is issued.
The Broker is obliged to have concluded a contract for professional liability insurance worth at least EUR 20,000.00 per adverse event, i.e., min. EUR 60,000.00 for all adverse events in one year.
The law introduces a prohibition on performing equivalent tasks, which means that the Agent cannot, without the consent of the Broker for whom he works, perform intermediary activities or other activities identical or similar to intermediation, nor provide services related to the work that is the subject of intermediation for himself or for another Broker. In the event that he/she violates the prohibition, the Agent is obliged to compensate the Broker for the damage or to transfer the earnings from such a transaction.
Additional obligations of the Broker defined by the Draft Law include the obligation of the Broker to carry out the control of documents relating to the property that is the subject of intermediation and warn the principal of any possible deficiencies regarding them, to perform actions for presentation on the real estate market, to try to enable the inspection of real estate and to mediate in negotiations, and the principal may, by a special and express power of attorney, authorise the Broker to conclude a legal work on his behalf, as well as to receive whole or part of the purchase price or rent. The Broker may also, for the purpose of receiving, storing, and handing over money in the name and for the account of the Principal, open special deposit accounts that cannot be subject to enforcement against the Broker.
By the rule, the Broker acquires the right to compensation at the moment of conclusion of the Contract for which he has intermediated, and will also be entitled to an intermediary fee if, within a period of 12 months from the termination of the Contract, the principal concludes a legal work with a third party that is a consequence of the activities of the Broker before the termination of the Intermediation contract. Bearing in mind the problems that arise in practice, i.e., the fact that the obligations from concluded contracts are not fulfilled, we believe that it would be expedient for the payment of the brokerage fee to be conditioned by the payment of a part or whole of the purchase price or rent.
The Broker is obliged to determine the general terms and conditions, which in particular contain: the amount of the intermediary fee, i.e., the method of determining the amount of the intermediary fee; a description of the jobs he is obliged to perform for the principal and the type and amount of costs for additional services. These general terms and conditions are an integral part of the Contract, and the Broker is obliged to display them in a visible place on their business premises and on the website, thus achieving transparency in their work.
The deadline for harmonization of the business of the Brokers is 12 months from the date of its entry into force.
The adoption of this law is justified and necessary and its implementation and consistent application will greatly contribute to making the real estate market much more regulated and even more attractive for serious clients.
By Marija Zivkovic, Partner, and Aleksa Jankovic, Associate, JPM & Partners ( Montenegro)