Recently, in the summer of 2022, the Valencia Government approved new regulation that basically seems to force all those persons who engage in the mediation, consultancy, and management of property to register. Deeper study of the regulation offers a more balanced conclusion.
Already many websites of law firms and estate agents can be found on internet that ‘inform’ about this regulation, although the only thing these ‘sources’ do is to copy and paste the regulation or each other. No critical note nor a well-considered analysis can be found. To our opinion they are wrong. This regulation is not meant for the second home property market, not even for all the primary home market.
Many estate agents who operate on the second home market for foreigners were afraid it would affect their business. We were obviously interested in studying this regulation to be able to give advice to our clients. We share some of our preliminary conclusions here as our study cannot be finished yet. The makers of this regulation, who are also the ones to enforce it, simply will not answer any reasonable question and just within our small team of lawyers, this regulation has and still provokes many, many questions.
We have serious doubts about the legality of this new regulation. First because we consider that this regulation is against the policy of an open self-regulated marked within the European Union that avoids monopolies. Almost 20 years ago the EU decided to cancel all kinds of limitations to many professions because the EU thought that these limitations created monopolies and limited a free market. The profession of property agent was regulated in many countries in those days. This was all undone under the spirit of free competition. Only few professions like lawyers, doctors and notaries were maintained. The new Valencian regulation goes against this free competition, establishing requirements within its territory to exercise a profession.
Another reason why we have serious doubts about the legality is because of its formulation. There is no clear definition of terminology. The interpretation of this regulation can go many ways. The possibilities of debate are endless. A government should make clear regulations. As a general rule of law, any uncertainty in formulation and definition of regulations should favour the citizens it affects. But as we have seen during the last 17 years since the Credit Crisis, the government does not care about following its own rules. If interpretation is a problem, they simply create their own along the way and have the people pay the price for their incompetence.
Over the last months we tried to get answers from the responsible department of the Valencian Government, but so far it has been impossible to reach them by phone or in writing.
Why this register?
The reason given by Valencian government is to promote access to an affordable primary home, protect owners and tenants and create transparency in the real estate market. Through regulation they aim to establish control for the better quality of service. The register would mean ‘undoubtable advantages’.
We understand the reason why the government has instated this regulation. It aims to protect consumers who are looking for an affordable primary home and to increase the quality of services. Professionalizing the property business is good for all true professionals. In that respect we support the regulation. We hope in time it will improve to achieve that goal and it will not become a tool just to rob under legal cover innocent professionals from their livelihood.
It is our understanding this register only applies to agents and operators who deal in the market of primary social housing for residents. It does not apply to the second home market, nor the ‘liberal’ primary home market.
Still, as the formulation is dubious and creates multiple interpretations, in the following we will analyse the regulation as if it were applicable on any kind of company or person professionally involved in real estate. The reason is because having yourself registered as a professional could be a marketing plus towards your clients and could enhance confidence!
Who should register?
The regulation is applicable to all persons or companies that carry out or want to carry out professionally or as a business, property intermediation, consulting or management within the territory of the Valencian Community in relation to social housing as defined in Law 2/2017. There is no specific reference to the purchase or sale, so rental agencies, keyholders, anyone involved somehow is included, including the management company that carries out repair services for housing. The definition is widely put. Let’s call all these professionals ‘property agent’ to make it easier to continue this analyse.
Requirements of registered property agents
The following is a summary of the minimum of requirements:
- Location and Service requirements:
The property agent must have a place of business open to the public unless the services are provided exclusively online by electronic means. This is where the first confusion starts, because the regulation states that Property Agents that provide online services should provide a ‘physical address’ within Valencia Territory where they are supposed to attend their clients. So it seems that in the end online services are not allowed and you must attend clients in Valencia territory at all time.
- Professional qualification requirements:
The property agent must provide proof of professional qualification for the exercise of the activity. Either one of the following options is valid:
- a) Possession of the Official Title of ’Agente de Propiedad Inmobiliaria’ issued by the competent Ministry. Registration with a professional organization is not required.
- b) Hold a university degree in Social and Legal Sciences, Engineering or Architecture.
- c) Possession of certificates of attendance and achievement of academic training courses of at least 200 teaching hours in property matters, related to mediation, consultancy, and management services.
When the activity is carried out through a company, the requirements of professional qualification must be fulfilled by the managing director. The qualification requirements shall also apply to the local manager in charge of establishments open to the public. A local manager may, in no case, oversee more than three establishments, and must sign or endorse all the mandates or contracts made in the name of the company.
In the case of agents operating exclusively by electronic means, the qualification requirements shall also apply to the person ‘linked’ to the physical address “who provides the services by electronic means if he or she is not a person registered in the Register”.
- Solvency requirements:
A person acting as a property agent must have in place guarantees and insurance in accordance with the following conditions:
1. A guarantee issued by a financial institution or insurance company, for all amounts given in deposit.
1.1. The minimum amount of this guarantee must be 60,000 euros per establishment open to the public and year of coverage.
1.2. Where it gets confusing is that the law states that the same requirement applies to a property agent who carries out his activity ‘exclusively by electronic or telematic means’. But, the minimum amount of this guarantee shall be 300,000 euros per agent and year of service if the Property Agent enrols his activity via telematics. We cannot get our head around this one.
2. Take out professional liability insurance or any other financial guarantee that covers, throughout the territory of the European Union, the liabilities that may arise due to negligence of the agent. So the territory is not limited to Valencia anymore. The makers of this regulation are now regulating over European territory. Further details and requirements of this policy are moreover unknown, the regulation states that the capital to be insured by the policy must be determined by bylaws that still not exist.
2.1. The insurance policy may be issued by insurance companies established in any Member State of the European Union.
2.2. The minimum amount of professional liability insurance for each agent shall be 600,000 euros per claim and insurance year, with a sublimit of 150,000 euros per victim. This is confusing as well as under 2. the law stated that these requirements were to be established in bylaws. If the real estate agent carries out his or her activity exclusively online, the minimum amount of professional liability insurance must be 1,000,000 euros per claim and insurance year, with a sublimit of 150,000 euros per victim.
All this information must be published in the invoice and on the website of the Property Agent.
Date of effectiveness
The obligation to register will be effective as of 30 july 2023. For now, there is no publication of a specific ‘penalty’ regime, so some authors think that law enforcement can apply the regime as laid down in another law that is linked to this decree and you will find the following penalties:
- Infringements classified as serious shall be sanctioned with a fine of 10,000.00 to 350,000.00 euros;
- Infringements classified as very serious shall be sanctioned with a fine of 350,001.00 to 950,000.00 euros.
The truth is that this penalty regime is applicable to other legalisation and has nothing to do with the registration as a Property Agent!
Still, if you have any doubt and you wish to avoid whatever problem, or in case you want to use registration for commercial purposes, Lex Foris can guide you through the registration procedure.
Roeland van Passel and Rafa Montes Velástegui