The law on real estate activity: the primary market is also in play

If the appearance of a federal law regulating the work of realtors can mean a lot for the secondary market, then for the primary market it means almost nothing: for example, polishing of details. And yet, developers have their own view on the fact that the document was developed, and their own suggestions on its content

During the discussion of the next version of the law on real estate activity, the position of the developers of the bill was announced, the position of the realtors themselves was clarified, now it is necessary to give the floor to developers whose contacts with realtors can be called more than close. Is the development community interested in adopting a law on real estate activity? And do developers have their own suggestions — what points should this law necessarily contain and what aspects of the work of realtors should be regulated?

“Given how much effort has been made to regulate the activities of development companies, it is quite logical that realtors have also come into focus. In general, it should be noted that the level of customer literacy has increased significantly. In addition, over the past three to five years, we have seen active penetration into this field of digital services, and major responsible players have emerged. Nevertheless, despite these and other positive changes, fraudulent actions with real estate have not yet become isolated cases,” Lenaria Khasiyatullina, commercial director of Capital Alliance, begins the conversation.

“In my opinion, one of the key factors in the resumption of discussion around the bill on real estate activity is the need to include shadow realtors in the tax base. The earnings of these players are quite high, and their participation in paying taxes seems to be a logical step. It is also worth noting that reducing the number of players due to the consolidation of companies is an integral part of the strategy to increase control over real estate activities. The fewer market participants there are, the easier and more effective it is to monitor and regulate their activities. All these are important steps towards improving the situation in the real estate sector. These measures contribute to increasing transparency and legality, which, of course, will have a positive impact on the real estate market as a whole,” continues Mikhail Chirukhin, Director of the Legal Department of the Dogma IC.

According to Anton Konobeevsky, sales director of Dominanta, “in general, the secondary market is more in need of regulation of real estate activities, where many pitfalls may occur during the transaction process: a complex legal history of the apartment (change of several owners, inheritance, and so on), cash settlements are still used when the amounts are not reflected in the the agreement.

Photo: Elnur/Lori Photo Bank

Some realtors do not register a legal entity or sole proprietor, do not reflect their income, respectively, do not pay taxes, which most likely worries the state very much. In the primary market, due to the combination of DDA, escrow accounts and project financing from banks, such problems do not exist — Rosreestr conducts a thorough inspection of the construction site when registering the first project transaction. In addition, all payments are verified by banks, and cases of cash settlements, including with realtors, are excluded.”

At the same time, Anastasia Korneeva, head of partner sales at Dominanta, regretfully emphasizes that the practice in the agency network market is such that people without the necessary education and often even without experience working with documents and people go to agents. “There are practically no requirements (education, experience, knowledge, skills) for this position. There are no unified training systems either (some companies have specialists involved in training, but this is not the most common practice). It happens that a realtor is employed in a real estate agency on an “honest word”, without registration, but at the same time he works with personal data and trade secrets,” the expert complains.

According to Anastasia Korneeva, a common situation is that the agency selects new employees, focusing on soft skills and promising training “from scratch”. “The training takes place spontaneously — the necessary information is requested from colleagues or searched on the Internet, where there is a lot of it, including incorrect. Not only beginners, but also experienced brokers do not always understand the differences and nuances in conducting transactions, depending on the scheme — what documents are needed, where they can be found / obtained, and so on. For this reason, buyers who rely on the qualified help of a professional find themselves in an even more stressful situation, seeing that the agent does not understand what needs to be done. And if the developer’s sales department comes to the rescue in the primary market, then everything is more difficult in the secondary market,” the interlocutor describes the situation BFM.ru .

Photo: Yuri Smityuk/TASS

Therefore, according to her estimates, the appearance of the law on the regulation of real estate activities should close several “hot” issues at once:

• training the agent, obtaining the necessary skills and knowledge of the current rules and legislation — knowing how the process should go, what documents are needed and where to get them, the agent will be able to provide more qualified assistance to his client;
• the agent’s responsibility to the client for the service provided is the conclusion of an agreement, payment of a commission fee and its refund if the transaction did not take place;
• the client’s confidence in the person he pays for work (in the secondary market) and an understanding of the risks when returning funds or changing the situation.

“That is, there should be an understanding that a qualified realtor is a professional who will give an assessment, pay attention to important details when choosing an object, calmly resolve any issue and will not leave the client alone with his problems. As they say, “a strong back,” sums up Anastasia Korneeva.

Do developers think that one of the key provisions of the new law — the maintenance of state registers of bona fide and unscrupulous realtors open to everyone — will change the segment for the better? “Probably, taking care of keeping the realtor on the register will be an important disciplining factor for the players. Convenience, rather, I would say, confidence for consumers of services — citizens. Developers, by and large, with the expansion of sales channels, including digital ones, need the services of realtors less and less,” Mikhail Chirukhin states.

Anton Konobeevsky supports his colleague’s opinion: “This will not affect the primary market in any way, since here realtors receive their remuneration after the transaction is completed, all settlements are transparent. Those realtors who conduct their activities incorrectly, cause reputational harm to the developer or the project, are simply excluded from the partner network, get on the “blacklist”. There may be “pitfalls” in the relationship between the client and the realtor (broker), but it is impossible to “open” them without the client’s participation.”

And Lenaria Khasiyatullina also believes that the creation of registers is quite a working idea, but they will be in demand more in the secondary market and when selling real estate under an assignment agreement from an individual (assignment of ownership rights). “It is critically important for such transactions that the realtor is responsible for the object being sold/purchased, carefully conducts a legal examination, informs the buyer about possible risks and does not take the object into sale, which may later have the risks of contestation. If we talk about the market of new buildings, the risks are minimal here, the developer has the opportunity to control the transaction and the agent’s activities. However, in these transactions, unscrupulous agents can take double commission from the client and from the developer, but such cases are rare today,” the expert emphasizes.

But Anastasia Korneeva, definitely saying yes to the appearance of registries, draws attention to several important details. According to her observations, now information on respectable or “black” realtors is transmitted by word of mouth and is contained within each company (usually in the security service, as well as in the lists and phones of employees who communicate directly with realtors). Yes, in case of unfair behavior, the realtor is excluded from the developer’s partner network, but, as a rule, this happens after the onset of a negative event. As they say, if you knew where you were going to fall, you would have laid a straw.

Photo: Valery Sharifulin/TASS

“The appearance of such lists is primarily necessary for clients, since so far the “black” realtors have not gone anywhere, or there are requests in narrow areas in which there are really few specialists. When creating such a list, it will be understood that a person is engaged in the sale of real estate not just “in his spare time”, but is a professional, knows the intricacies of his business and develops. Laws are being amended in real estate, conditions in banks for lending and servicing programs are constantly changing, and the realtor is also studying a huge layer of information on existing projects (from the developer) or checking the history of an apartment on the secondary market in search of the best solution for his client,” explains Anastasia Korneeva.

The paragraph contained in the bill that only legal entities should be allowed to engage in real estate activities (no self-employed and “just citizens”) it caused a mixed reaction. For example, Anastasia Korneeva, analyzing the practice of her company, notes that the introduction of such a restriction will not change anything for the developer (as, apparently, for the vast majority of development structures). “From the point of view of agencies that conduct their activities transparently (opened a company, honestly make calculations and pay taxes), this (restriction) also looks fair. But on the other hand, the question remains open from the point of view of registration of agents in the state. As already mentioned, now agents are sometimes not officially employed,” the expert says.

Mikhail Chirukhin thinks that “limiting the number of players in the market does not contribute to increased competition and cheaper cost of services. Therefore, such a proposal is hardly worth considering as appropriate. If the realtor is a citizen who is an individual entrepreneur, is professional, insures his liability and is on the register, then such a restriction will be unnecessary for him.”

“It is correct to separate practices here. To work in the secondary market and when implementing an assignment agreement from an individual, such a clarification is quite appropriate: in these transactions, much depends on the agent. In case of incompetence, a legal entity should be responsible, including in terms of compensation for losses incurred by the client. The primary market is traditionally more transparent. Therefore, it is possible to allow both legal entities and sole proprietors to work here — the security of the transaction (and the client) is insured by escrow accounts. And in general, the main volume of transactions is controlled by the developer, the possibility of unfair actions on the part of the realtor is minimal. Therefore, subject to the introduction of realtor liability insurance, I think that restrictions for sole proprietors should not be introduced,” Lenaria Khasiyatullina is sure.

In short, if the appearance of the federal law on real estate activity can mean a lot for the secondary market, then for the primary market it means almost nothing: for example, polishing of details, no more. Therefore, answering the question of what provisions the new law must necessarily contain, the interlocutors BFM.ru they also mainly talked about the practice of the secondary market, which, for example, the mandatory insurance of real estate activities mentioned in the document would definitely not hurt: of course, the price of the service may increase, but the client will benefit in its quality and safety.

As for the primary market, according to Anton Konobeevsky, it would be worthwhile to provide responsibility for the correctness of the information about the client that the broker provides to the developer, as well as for the correctness of the information that the broker provides to the client about the developer and the project. And also — the broker’s responsibility for “not telling the client to the logical end,” adds Anastasia Korneeva. She emphasizes: there are situations when an agent transfers a client to a developer, without even telling anything about the project that he offers, and leaves for the sea, expecting a commission from the developer.

“After all, the value of an agent for a client consists in an independent assessment, expertise, sometimes even more psychological support from an agent is needed before an important step (which, of course, is not prescribed in the law). It happens that it is necessary for the broker to go to the bank with the client to sign a loan agreement, help issue an EDS or open an escrow account, monitor processes, timing, direct, tell about further steps — what will need to be done, for example, in a year, what expenses the client will have now, what may arise in the future. There are often situations when the client does not have time, and therefore it is necessary to agree on some conditions individually, to hold a meeting online, for example,” the expert lists.

In general, the law will definitely benefit all participants in the transaction — the realtor, the client, the developer, says Anastasia Korneeva: “For example, it is important to register agents from real estate agencies (so that you can easily verify that the realtor really works in the specified location). It is also very important to work out the issue of certification (training): obtaining primary knowledge about document management, legislation, and the process of conducting a transaction on the “primary” and “secondary” (at least with standard conditions).”

But here’s what Mikhail Chirukhin shared with the portal. “The Civil Code is an effective tool for concluding contracts between a client and a realtor. Any attempts to impose rigid contract models limit the principle of freedom of contract embedded in civil law. There are working methods for regulating professional activity, such as licensing, self-regulation and liability insurance, which could work here without breaking into a separate model of state control.”

See also:

Effective ways to protect your business

Objects of special regulation: What awaits them?

What should I invest in so as not to lose?

How to successfully resist scammers?

Import substitution of technologies: pros and cons

Is it possible to prevent the theft of personal data?

Complicating the process of implementing these rules by the legislator ultimately increases the cost of the service, since the cost of complying with the law will be included in the realtor’s fee. In addition, the agency responsible for overseeing compliance with the law will increase its staff and open new offices, which will also require funds from the taxpayers’ budget, the expert states.

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