Towards a Regulated Property Sector
An Overview of the Real Estate Sector
Throughout the past decade, the property market experienced substantial development, making the real estate sector a central pillar in the local economy. In view of this, the Maltese legislator has set out to regularise the real estate sector by means of a bill designed to streamline actors in a property transaction. The regularisation of the sector has been achieved through the introduction of a licensing system issued by the newly established Licensing Board (the Board). As of 1st January 2022, all real estate agents, property brokers and property consultants shall be required to obtain a license to legally engage in intermediary activities. This will in turn result in an increased standard of legal protection for consumers. Persons engaging in such activities themselves will also benefit due to a register of licensees being kept and published by the Board, an increased standard of public trust, authenticity of qualifications and remuneratory protection.
The Real Estate Agents, Property Brokers and Property Consultants Act (Chapter 615 Laws of Malta) will become enforceable as of the 31st of December, subject to a maximum penalty of 20,000 Euros applicable for any breaches of the Act’s provisions.
Which professions are regulated by this law?
The targeted demographic comprises of intermediaries of a transaction of acquisition, disposal or lease of an immovable property. The law divides such intermediaries into four categories, all of which require a licence under the act:
- Real estate agents, being natural persons licensed to negotiate and arrange transactions, if one employs and/or engages one or more branch managers or property consultants
- Property brokers, being natural persons licensed to negotiate and arrange transactions, without employing or engaging any branch managers or property consultants
- Property consultants, being natural persons licensed to negotiate and arrange transactions under the direction of a branch manager
- Branch managers, being a person licensed and employed or engaged to supervise property consultants
Notably, whilst property consultants and branch managers need to be associated with an agency, real estate agents and property brokers can also be individuals engaging in such activities alone.
The law creates an exemption for holders of such occupations who only engage in the described activities occasionally. This is further defined as where one:
- acts an intermediary in not more than two transactions annually;
- does not advertise his services; AND
- does not employ or engage anyone to assist him in the intermediary duties.
Whilst not being bound by licensing requirements, such individuals must still submit a notification to the Board expressing their intention to occasionally engage in intermediary activities.
Besides licensing requirements, the law also imposes other obligations on people holding any of the regulated occupations. For instance, any partnership formed by a real estate agent and any other person must obtain the Board’s authorisation before engaging in intermediary activities. This applies in addition to the legal formalities otherwise necessary for any partnership to be incorporated or registered. The Board’s remit extends also over the duty to approve names for property brokers or real estate agents. The approval of names will depend on any resemblance to the name of any other person, firm or company operating under a local or foreign property broker or real estate license, considering whether such resemblance will prompt deceit.
Moving away from Board authorisation, the law also imposes the duty on persons in such occupations to inform clients of the fees applicable on concluding the transaction. The law also caters for a right of fair compensation due, as quantified by the court, where a transaction falls through following services being rendered. This heightens the importance of having adequate engagement agreements or service agreements in place with every potential buyer or potential seller.
Licensing Eligibility Criteria
The licensing eligibility is set out in Article 4 of the Real Estate Agents, Property Brokers and Property Consultants Act. The first criterion for eligibility is that, unless legally emancipated to trade in line with Article 9 Commercial Code, a candidate is only eligible to obtain a license if one is more than eighteen years old. The second is an academic criterion, satisfied with obtaining a certificate in real estate which covers legal, financial, technical and communication issues, as well as marketing and sale. Equivalent qualifications recognized by the Malta Qualifications Recognition Information Centre are also accepted. The requisite academic level depends on whether one is a property consultant or otherwise.
Whilst the eligibility criteria are rather wide, the law restricts licensing access in case of bankruptcy without an order of discharge, or if the applicant’s conduct and repute, financial position and the general public interest render an applicant not fit and proper to engage in such activities.
In terms of the Declaration of Intent Regulations 2020, any real estate agents, property brokers, property consultants or branch managers who did not meet the qualification criteria but wished to apply nonetheless were required to inform the Board of their intention to apply for a licence by the end of March of 2021.
The Application Process
Apart from the requisite academic qualifications, applicants need also obtain and submit other documents, including a police conduct and a notary public or accountant’s statement reflecting on one’s financial status. Nonetheless, the Board retains the right to impose conditions which are objectively justified and to request any other information or documentation substantiating the application if the Board deems such additional documentation necessary to reach a conclusion.
Once the application and supplementing documentation are submitted and the Board acknowledges receipt, the Board is legally required to process the application within two months, which period is extendable to three months. The Board has discretion to accept or refuse to entertain a licensing request subject to an obligation to inform the applicants of the outcome of the application as well as a reason for such decision. Any license awarded is valid for a five-year period and is renewable subject to the Board’s approval.