Real Estate Industry Overhaul – an Overview

20 January 2021

The entry into force of the Real Estate Agents, Property Brokers and Property Consultants Act marks a major development for the real estate industry in Malta. In response to the rapid growth of the industry over the past years, Chapter 615 of the Laws of Malta formally regulates for the first time this central pillar of the Maltese economy.

Through the newly introduced licensing requirements, together with the setting of clear educational thresholds and continuing professional development requirements which need to be satisfied, the real estate industry is bound to improve on various different levels, not least in terms of transparency and responsibility among those acting as intermediaries between property buyers and sellers.

A commendable feature of the new Act is its clarity in precisely defining the activity of property brokers and real estate agents, as well as the distinct roles of the four different property agents to which its substantive provisions apply:

  1. Property brokers are defined as “any natural person who has a licence to act as an intermediary in the process of negotiating and arranging transactions involving the acquiring or disposing of leasing of land in terms of this Act and does not employ and, or engages (whether under a contract of service or a contract for services) any branch managers and, or any property consultants.”
  2. Real estate agents are defined as “any natural person who has a licence to act as an intermediary in the process of negotiating and arranging transactions involving the acquiring or disposing or leasing of land and employs and, or engages (whether under a contract of service or a contract for services) one or more branch managers and, or one or more property consultants.”
  3. Branch managers are defined as “any natural person who is a holder of a licence and is employed or engaged to supervise any property consultant.”
  4. Property consultants are defined as “any natural person who has a licence to act as an intermediary in the process of negotiating and arranging transactions involving the acquiring or disposing or leasing of land in terms of this Act and is employed or engaged (whether under a contract of service or a contract for services) by an estate agent and who acts under the directions of the same or those of a branch manager.”

The overarching aim of this novel legal regime is to introduce a licensing requirement on all of the abovementioned property agents in order for them to continue operating as such after the 31st of December 2021. The Act also requires the formation of a partnership when a real estate agent intends to carry out his activity with any other licenced person over an extended period of time.

Anyone who carries out the activity of a property broker or real estate agent on an occasional basis is exempted from such licensing requirements, on condition that such persons neither advertise their services nor engage anyone to assist them in such occasional activity. The law quantifies ‘occasional’ as not exceeding two transactions per annum involving the acquiring or disposing or leasing of land, and imposes the obligation to notify and bring forth the relevant information on such transactions to the Licensing Board, another novel feature of the Act. This provision was introduced to cater for those isolated instances where brokerage services are provided by individuals who do not ordinarily work in the profession, however it remains to be seen how this will be enforced to ensure that the exemption will not be abused of.

Any person who does not abide by any of the abovementioned requirements is liable to an administrative fine not exceeding twenty thousand euro (€20,000).

Essentially, there are two  criteria which must be satisfied in order for one to  be eligible to apply for a property agent or property consultant licence, namely that the person must be over eighteen (18) years of age and that he / she holds a Certificate in Real Estate from a licenced educational institution of at least 8 ECTS (MQF level 4) for property consultants and 12 ECTS (MQF Level 4) for agents, brokers and branch managers. The licencing authority is also empowered to carry a fit-and-proper test on all applicants as part of its application processing exercise.

The Act allows for the Licensing Board to cancel or suspend a licence which it has granted, and which are normally valid for five (5) years from the date of issue. The Act lists a number of scenarios within which this can occur, such as, where the Board determines that the licensee no longer fulfils or meets the requirements, or has contravened any of the provisions of the Act.

A feature of significant importance in the new law is the obligation imposed on Licensees, under Article 12, to make known to the parties, in advance, the fees to be charged for their services. It is now extremely important that a Service Agreement is in place between the broker / agency and the clients (be they the prospective buyers or sellers), clearly indicating the terms of engagement and when a service fee would indeed be due.

The proviso to this Article is one of significant importance to brokers and agents in that it provides for “fair compensation” to be paid even when a transaction is not actually completed. This provision, based on a very similar quasi-contract enshrined in the Maltese Civil Code (known as ‘servigi’), offers a high degree of protection to licencees, since it provides for a clear legal remedy which they may avail themselves of in any instance where the parties would refuse to compensate them for their efforts in securing the property deal. Whilst it remains to be seen how this provision will be applied by the Courts in practice, it is surely a step in the right direction to ensure that professionals involved in this industry are adequately compensated for their services.

Services offered by AE Legal

AE Legal is pleased to be one of the leading firms in this process of passing on the necessary legal knowledge to future licence-holders in this industry, as is now required by law for the issuing of a license. The program which AE Legal has already begun, and will continue to offer, focuses entirely on the legal framework which licensed property agents will be operating in. It centres around:

  1. Contract law and the various elements which must concur for the drawing up of a valid contract;
  2. The specific requisites of lease and sale agreements;
  3. The newly enacted Real Estate Agents, Property Brokers and Property Consultants Act, with a substantially more rigorous analysis of its provisions than what is ventured in the above article.

Apart from delving into a section-by-section analysis of the most pertinent laws regulating the industry, the program will progress in an interactive manner, with participants having the opportunity to put forward any questions they might have at every juncture.

Furthermore, our team at AE Legal already acts as counsel to some of Malta’s leading estate agencies. By virtue of their expertise in property law and civil/commercial litigation, our team can help with drafting clear and comprehensive Service Agreements which protect Agencies and their representatives whilst also assisting with civil claims when the agency is deprived of the service fee (in the case of a successful transaction) or fair compensation (if the transaction is not concluded) it would be due.

For more information, feel free to get in touch with us on +356 20958200 or via email info@ae.com.mt